How do I pay my taxes with a credit card? (2024)

Today is Tax Day and if you're rushing to file your return by midnight It could be tempting to pay your taxes with a credit card. After all, you'd have some breathing room until the bill was due and maybe even earn rewards.

The IRS adds processing fees to credit card payments, however. And if you don't pay your bill in full and on time, you could be looking at serious interest charges.

Below, CNBC Select reviews the benefits and drawbacks of using a rewards credit card to settle your tax bill.

Yes, you can pay your taxes with a credit card. The real question, is should you?

Unlike paying your taxes with a check or automatic bank transfer, credit card payments come with a processing fee. The fee is a percentage of your tax payment that varies depending on the payment processor you choose.

There is also amaximum number of card payments allowed, based on your tax type and payment type.

There are three IRS-approved third-party payment processors for debit and credit card payments. Each company has different fees:

PayUSAtax.com

• Credit card fee: 1.82% (minimum $2.69)
• Debit card fee: $2.14
• Cards accepted: Visa, Mastercard, Discover, American Express and more

Pay1040.com

• Credit card fee: 1.87% (minimum $2.50)
• Debit card fee: 1.87% or $2.50 minimum for consumer/personal debit cards
• Cards accepted: Visa, Mastercard, Discover, American Express and more

ACI Payments, Inc.

• Credit card fee: 1.98% fee (minimum $2.50)
• Debit card fee: $2.20
• Cards accepted: Visa, Mastercard, Discover, American Express and more

Earn credit card rewards

If you use a rewards credit card to pay your taxes, you can earn cash back, points or miles.

For instance, if you owe $1,000 to the IRS and pay it with a credit card using payment processor PayUSAtax.com, you'll incur a 1.82% fee ($18.20). To recoup that fee and make a profit, you'd need to use a card with a return of more than 1.82% — which you can easily accomplish by earning $20 or more in rewards with a 2% cash-back card or 2X travel rewards card.

A card like the Wells Fargo Active Cash® Card offers unlimited 2% cash rewards on every purchase. After subtracting the 1.82% fee from the 2% cash rewards, you'd earn a 0.18% profit on your $1,000 tax payment — which is $1.80.

That's not a big return, but it would be higher if you owe more. Plus, a single tax payment could easily qualify you for this card's welcome bonus of $200 in bonus cash rewards after spending $500 in purchases in the first three months after opening the account.

Enjoy special financing

If you need to put off paying your tax bill and have explored your options for delaying payment, a credit card with an intro 0% APR period could help: The Discover it® Cash Back card has no annual fee and an intro 0% APR for the first 15 months on purchases and balance transfers (after that, a variable 18.24% - 28.24% APR applies). There is a 3% introductory balance transfer fee with a fee of up to 5% on future balance transfers (see terms).

Discover will also automatically match all the cash back you've earned at the end of your first year. This card earns 1% back on spending that falls outside of its rotating 5% back bonus categories on up to $1,500 in combined purchases after you activate the bonus every quarter (then 1%). With the welcome offer, you'd effectively earn 2% back on tax payments you make in the first year.

The Wells Fargo Active Cash Card also provides a 0% intro APR for 12 months from account opening on purchases and qualifying balance transfers (after that, a 20.24%, 25.24% or 29.99% variable APR applies). Balance transfers made within the first 120 days qualify for an intro transfer fee of 3% of the amount transferred, after that, a 5% fee of the amount you transfer applies ($5 minimum).

Meet spending requirements for welcome bonus offers

If you open a new credit card with a welcome bonus, charging taxes to your card can help you meet the spending requirement. Before using a credit card, however, do the math to see if the bonus outweighs the IRS's processing fee.

The Chase Sapphire Reserve® has a welcome bonus offer of 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. If you charge $4,000 in taxes on the card using PayUSAtax.com, you'll incur a processing fee of $72.80. Considering the bonus is worth $900 in travel when you redeem through Chase Travel℠, it may be worth it.

Processing fees

Credit card tax payments are charged a processing fee. No part of the fee goes to the IRS, and the amount varies on the payment processor you choose.

If you pay with a credit card with rewards that don't outweigh the fee, it doesn't make sense to use a credit card.

Interest on unpaid balances

If you use a credit card to pay taxes, it's key to pay your balance in full by the due date. Otherwise, you risk having to pay significant interest charges and even damaging your credit.

High credit utilization rate

Paying taxes with a credit card can also hurt your credit score by spiking your credit utilization rate.

To calculate your credit utilization ratio, divide your total credit card balances by your total available credit. If you have two cards with a combined balance of $2,000 and a total credit limit of $10,000, your utilization rate is 20%. Adding a $2,000 tax payment to that would increase your utilization rate to 40%, which is high.

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If your credit card's rewards or welcome bonus offer outweighs the IRS's processing fee, paying your taxes with a card may be worthwhile.

But if the fees are greater than any rewards or you're not sure you can pay the card balance in full by the due date, stick to one of the free tax payment options, such as a bank transfer.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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