Can You Pay Car Taxes With a Credit Card
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- You can pay taxes with a credit card through third-party providers — not through the IRS website.
- If you cannot pay off your credit card balance immediately, you are usually better off setting up a payment plan with the IRS than using your credit card to pay your taxes.
- Paying taxes with a credit card to earn a big sign-up bonus or reward points makes sense if the value exceeds the credit card fee you will be charged.
- See Personal Finance Insider's picks for the best tax software »
You can pay your taxes with a credit card, but that doesn't mean it's always a good idea.
The IRS allows you to pay with a credit card through third-party partners or when you e-file your taxes through online tax services like TurboTax or H&R Block.
Paying taxes with a credit card isn't free, but sometimes it could make sense. Here's how to figure out what's best for you.
Which taxes can you pay with a credit card?
You can pay your annual tax return, due when you file your taxes sometime between the beginning of the year and April 15. You can also use a credit card to pay quarterly estimated tax payments, which are most common for people who are self-employed or who have freelance income.
Some states, cities, and counties allow you to pay income and property taxes with a credit card as well.
What it costs to pay your taxes with a credit card or debit card
The IRS works with three payment processors to handle tax payments made via debit or credit card. There are also options for paying your tax bill with a credit card when you e-file.
Debit card payments require a small flat fee, but you can just as easily pay your taxes with a bank account transfer for free. In most cases, that will be the better option.
For paying your taxes with a credit card through a third-party processor, you'll pay the following convenience fees:
- PayUSAtax: 1.96% fee with a $2.69 minimum fee
- Pay1040: 1.99% fee with $2.58 minimum fee
- ACI Payments (formerly OfficialPayments): 1.99% fee with a $2.50 minimum fee
If you pay your taxes with your credit card when you file online through tax software like TurboTax or H&R Block, the fees typically start at 2.49% but could be even higher.
When not to pay taxes with a credit card
Deciding whether it makes sense to pay an extra fee when filing your taxes depends on your card's rewards and your ability to pay it off before the next statement due date.
If you can't pay off your balance in full every month, you should avoid paying your taxes with your credit card. With average credit card interest rates around 15%, it is better to set up a payment plan with the IRS than pay huge interest charges from your credit card (not to mention the convenience fee). Interest rates associated with an IRS payment plan will be around 5% or so.
Some credit cards offer an introductory 0% APR on purchases for a limited time. It might be tempting to use one of these offers to spread out tax payments without incurring big interest charges, but be very careful. You'll still need to make at least the minimum payment each month, and if you don't pay off the balance before the promotional period ends, you'll end up with high-interest debt.
When to pay taxes with a credit card
If you do pay your balance off in full every month, you could be a good candidate to pay your taxes with a credit card — but only if the rewards are bigger than the fee. With the Citi® Double Cash Card, for example, you'll get the equivalent of 2% cash back (1% when you spend, 1% when you pay your bill). That's only slightly more than the fee, so unless you have a huge tax bill, it's probably not worth it.
However, if you use Chase Ultimate Rewards points from Chase Freedom Unlimited®, at 1.5% cash back (or 1.5 points per dollar), as travel rewards paired up with a premium Chase credit card it could also make sense. The Chase Freedom Unlimited® also offers 5% cash back (5x points) on travel booked through Chase, and 3% back (3x points) on dining and drugstore purchases.
When you hold the Chase Sapphire Preferred® Card, Chase Sapphire Reserve®, or Ink Business Preferred® Credit Card, you get a bonus when you redeem points through the Chase Ultimate Rewards Travel Portal or for eligible purchases through Pay Yourself Back.
With the Chase Sapphire Preferred® Card and Ink Business Preferred® Credit Card, your points are worth 1.25 cents each when you redeem this way. With the Chase Sapphire Reserve®, they're worth 1.5 cents each, so moving points to your Sapphire Reserve account is a great way to increase their value. And you could get even more from your rewards by transferring points to Chase's airline and hotel partners — potentially well over 2 cents apiece.
Alternatively, if you're using your taxes to hit the minimum spending requirement to earn a credit card sign-up bonus, you might end up getting a value that far exceeds the tax-processing fee you paid. But if you don't earn rewards or their value is less than 1.96%, you should only use a card if it will get you over the hurdle for a bonus. Otherwise, you will spend more than you get back in rewards!
How to pay taxes with a credit card
Paying your taxes with a credit card is easy and only takes a few minutes. Head to IRS.gov or directly to your preferred payment service (listed above).
When you get there, you'll need to enter your tax ID (Social Security Number or Employer ID Number) as well as your credit card number, billing information, and a few other details.
After you pay, make sure to print out a copy of your receipt or save it as a PDF and keep it with your tax return. The IRS recommends holding onto copies for at least three years — the typical length of time the IRS would look back if you happen to get audited. If you find yourself in a situation where you've overpaid, you can always get excess payments back with a refund.
Paying taxes with a credit card only makes sense in a few situations
If you need to spend a lot of money to unlock a rewards credit card welcome bonus, paying your taxes with a credit card could be a good strategy, but only if the rewards are worth more than the cost of the credit card fee.
Just make sure you're also practicing good financial discipline, like paying your balances off in full each month, making payments on time, and not spending more than you can afford to pay back. Basically, treat your credit card like a debit card.
When in doubt, pay your taxes the free way — by using a direct bank account transfer.
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Eric Rosenberg
Freelance Writer
Eric Rosenberg is a finance, travel, and technology writer in Ventura, California. He is a former bank manager and corporate finance and accounting professional who left his day job in 2016 to take his online side hustle full-time. He has in-depth experience writing about banking, credit cards, investing, and other financial topics, and is an avid travel hacker. When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers, and spending time with his wife and little girls. You can connect with him at Personal Profitability or EricRosenberg.com .
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Can You Pay Car Taxes With a Credit Card
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