This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.
You can pay taxes with a credit card, but there’s an extra fee.
Image source: Getty Images
When tax time rolls around, a common question is whether you can pay what you owe with a credit card. It could be more convenient to pay this way, and you’d be able to earn credit card rewards in the process. Here’s everything you need to know about using credit cards for tax payments, straight from the IRS.
Can taxes be paid with a credit card?
Yes, you can pay taxes with a credit card. The IRS uses third-party payment processors for card payments, and each processor charges a transaction fee. Here are the payment processors and their credit card fees for the 2023 tax season:
Save: This credit card has one of the longest intro 0% interest periods around
More: Save while you pay off debt with one of these top-rated balance transfer credit cards
payUSAtax: 1.85% ($2.69 minimum)Pay1040: 1.87% ($2.50 minimum)ACI Payments, Inc.: 1.98% ($2.50 minimum)
Fees are much lower if you pay by debit card. Two of those processors accept debit card payments for a flat fee of $2.20. You could also pay with a bank account transfer, either through the tax filing software you use or the IRS website. Bank account transfers are fee-free.
How to pay taxes with a credit card
Here’s how to pay your taxes with a credit card:
Go to Pay Your Taxes by Debit Card or Credit Card or Digital Wallet on the IRS website.Decide which payment processor you want to use. Since payUSAtax has the lowest percentage fee, it’s the best choice, unless you only need to pay a small amount.Click “Make a Payment.”Follow the instructions on the payment processor’s website.
Pros and cons of paying taxes with a credit card
There are ways you can benefit from using a credit card to pay your taxes, but there are also some big potential drawbacks. Here are the pros of paying taxes with a credit card:
Earning credit card rewards: With some of the top rewards credit cards, it’s possible to get a return of 2% or more on purchases. That means you could come out ahead on the credit card processing fee.Completing sign-up bonus requirements: The most valuable credit card sign-up bonuses often have big spending requirements, such as spending $5,000 in the first three months. A tax payment is a great way to complete spending requirements that would otherwise be out of reach for you.Getting extra time to pay your tax bill: Normally, credit cards aren’t good for paying off purchases over time because of their high interest rates. The exception is 0% APR credit cards. These offer a 0% APR for an intro period, so you could pay your taxes off in monthly installments with no interest charges.
Now, let’s go over the cons:
Fees: It costs at least 1.85% to pay taxes with a credit card, which would add $185 to a $10,000 tax bill. If you’re not earning more than that with credit card rewards, then paying this way will cost you extra.Risk of credit card debt: Putting large purchases on your card makes it more likely you end up in credit card debt. Only pay for taxes with a credit card if you know you’ll be able to pay the balance in full by the next due date — or if you’re using a 0% APR credit card.Damaging your credit score: An important factor in your credit score is your credit utilization ratio. This is your card balances in relation to your credit limits. If your card’s balance gets too high from an expensive tax bill, it can negatively affect your credit score.
Should you pay your taxes with a credit card?
If you can earn more in rewards than you pay in fees, paying taxes with a credit card could be a good idea. You could pay using a card that earns 2% back on purchases or a card with a high-value sign-up bonus. I pay my taxes with a credit card every year because I know I’ll come out ahead from the rewards earned.
Another situation when using a credit card for your taxes could make sense is when you can’t pay it in full right away. In that case, a credit card with a 0% intro APR will give you time to pay off your taxes and avoid interest charges.
As explained above, putting your taxes on your credit card carries some risks. If you think it could cause any issues for you, like unnecessarily carrying a balance forward on your card, then you’re better off paying with a bank account transfer.
Top credit card wipes out interest until 2024
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR for up to 21 months! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
