Adjust Text Size

Should You Pay Your Taxes With a Credit Card?

Written by Nickel - 9 Comments

The question of whether or not to pay your taxes with a credit card has been around for a few years now. According to conventional wisdom, the answer is “no” — the fees associated with doing this are simply too high. But what if your reward credit card is generous enough to more than offset those fees?

Edit: While there used to be a great 5% cash back promo floating around, it has since expired… When this deal was still available, you could couple it with payment through OfficialPayments.com, which charges a 2.49% processing fee, and you can earn a quick 2.51% by paying your tax bill with a credit card.

I would’ve been all over this deal myself this year if we hadn’t intentionally under-withheld to the point that our tax bill will be far larger than what we could reasonably put on a credit card.

Update to add: And no, your credit card rewards aren’t taxable.

Published on February 4th, 2008
Modified on April 21st, 2008 - 9 Comments
Filed under: Credit Cards, Taxes

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

Related articles...

» Paying Your Taxes with American Express Membership Rewards Points – Deal or No Deal?
» links for 2007-01-28
» How Are You Preparing Your Taxes?
» Social Security Taxes in 2009
» Money Poll #6: Tax Preparation
» Social Security Taxes in 2010
» links for 2007-03-01
» 3rd Quarter 2007 Estimated Taxes Due

Was this article useful? Please sign up to receive our content via e-mail:

You will receive only the daily updates, and can unsubscribe at anytime.

9 Responses to “Should You Pay Your Taxes With a Credit Card?”

  1. 1
    SavingDiva Says:

    I managed to get a tax refund this year (~$200 federal, ~$250 state). However, if I did owe taxes, I don’t think I would put it on my credit card…it’s a very rare card that the cash back would make it worth it. Also, I would worry about paying it off….

  2. 2
    livingalmostlarge Says:

    Is the fee really so small? That’s what has stopped me in the past.

  3. 3
    Ron@TheWisdomJournal Says:

    2.51% would be great, but does Citi turn around and 1099 you for it next year? :)

  4. 4
    Brandon Says:

    How large of a credit limit does Citi give you for this card? Just curious if it is high enough to make it usable.

  5. 5
    nickel Says:

    Brandon: I suspect that will vary widely based on things like credit score, income, etc.

  6. 6
    Auditor Says:

    I know there is an additional fee you pay the IRS if you use a credit card to pay. I don’t remember how much, or maybe it’s a percentage. This could put a little rain on the Citi parade.

  7. 7
    nickel Says:

    Auditor: The additional fee is levied by the payment processor, and it’s 2.49%. That’s it. There are no further fees. Obviously, for a “normal” reward card that gives 1% on things like this, you’re still being the eight ball. But if you have a card paying in the 3-5% range, then you can effectively shave a bit off your tax bill.

  8. 8
    Amy K. Says:

    For me, I’ll come out ahead by paying one of the Flat fee options rather than a percentage. I owe just under $500, so a $2.96 fee beats the $12.45 through OfficialPayments.com or pay1040.com.

  9. 9
    Amy K. Says:

    D’oh, nevermind, I just saw that the flat fee is for ATM/Debit cards only, and neither of mine have a rewards program associated.

    It pays to read the fine print first, oops!

Leave a Reply

Disclaimer...
Because rates and offers from advertisers shown on this website change frequently, please visit referenced sites for current information. This website may be compensated by companies mentioned through advertising, affiliate programs or otherwise.

FiveCentNickel User Survey