5 Smart Reasons to Pay Business Taxes With a Credit Card in 2024

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You can pay federal and state taxes with a credit card. Find out why you may want to do so. [[{“value”:”

Unless you’re a giant corporation who can loop every hole, your business is going to need to pay taxes. Indeed, you’re going to need to pay them multiple times a year thanks to quarterly estimated tax requirements.

When it’s time to pay those taxes, consider how you’ll pay. You could do an ACH transfer from your bank account. But you could also pay with a small business credit card. Here are some of the reasons I always choose that option.

1. Big tax bills = easy welcome bonuses

The best welcome bonuses require spending $3,000, $5,000, or even $10,000 on the new card within the first three (or sometimes six) months. While this can be a challenge with regular spending if you’re a smaller business, it’s a breeze when you’re paying taxes.

I’m not exactly a seven-figure CEO, but even my little business owes thousands of dollars in taxes each quarter. So, I often time my new credit card applications to coincide with a quarterly tax payment. This ensures I can easily meet the spending requirement without having to make any out-of-the-ordinary purchases.

2. Intro 0% APR offers let you pay over time

Ideally, you’re regularly setting aside a portion of your income to pay your quarterly estimated taxes. (I keep mine in a high-yield savings account!) But if you’re a little behind, using a credit card with an intro 0% APR offer could give you vital breathing room.

These offers typically give you at least six months of 0% APR on new purchases — though the best intro APR cards offer 15 months or more. This lets you carry a balance without worrying about interest fees accruing, so you can pay off your tax bill over time.

Just be sure to pay off your balance before the offer expires. Once the introductory period ends, any remaining balance will start accruing interest at the regular APR.

3. Accounting is easier when things are separate

If you’re a sole proprietor, you may not think too much about drawing a line between business and personal purchases. But if you’re trying to keep any kind of distance between the two for accounting purposes, using a business credit card is a must.

Having all of the transactions on your statement being clearly for business purposes makes accounting significantly easier. Bonus points if you also use a business checking account to make payments on the card.

4. Rewards can make up for convenience fees

One argument against paying your taxes with a credit card is the convenience fee. It’ll vary by processor, but expect to pay a fee of at least 1.82% to use your credit card to pay your federal taxes. (Some states charge even more.)

The nice thing about rewards credit cards, however, is that you can negate all of that fee — plus still come out ahead — with the right card. For example, a good flat-rate 2% cash back rewards card would still earn you a net positive 0.18% cash back on your payments with a 1.82% fee.

This means you need to consider carefully which card you use. Many cards with bonus categories have a lower flat rate for non-bonus purchases (1% to 1.5% is common), so you may not earn back the convenience fee with these cards.

5. You could build business credit

Just like you have a personal credit history (well, actually, three of them), your LLC or corporation can build business credit. A positive credit history can help your business qualify for business financing, as well as better rates on business insurance and from some suppliers.

Also, like personal credit, opening and responsibly using a business credit card can help grow your business’s credit history. Here are a few things to keep in mind:

Always make at least the minimum payment on time. Nothing wrecks a credit score — business or personal — faster than a late payment.Keep your card balances low. If you can’t pay in full, at least try to keep your utilization (how much of your credit limit you’re using) below 30%.

A whole new world of credit cards

I love that my small business has opened up a whole world of additional credit card possibilities. My business cards not only make my accounting life easier, but they also help me earn tons of rewards on all of my business purchases — including my taxes. So long as you watch out for fees, they can be a great way to pay your estimated and annual business taxes.

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