Paying Taxes With a Credit Card to Hit a Welcome Bonus
How it works
The IRS does not take cards directly, but it authorizes a handful of third-party processors that do. You pay your federal tax bill, or an estimated payment, through one of them with your credit card, and they charge a processing fee of roughly 1.75 to 1.85 percent of the payment. The tax itself goes to the IRS as normal; the fee is the cost of paying by card.
When it is worth the fee
For ordinary rewards, paying a 1.75 percent fee to earn maybe 1.5 to 2 percent back is close to break-even and usually not worth the hassle. Where it shines is meeting a welcome-bonus minimum spend. If a card needs $6,000 in three months for a bonus worth $1,200 in travel, pushing a $6,000 tax payment through a card for about $105 in fees can clear the requirement on its own, and the bonus is worth far more than the fee.
The rules and cautions
There are limits on how many card payments you can make per processor per tax period, so check the current caps before you plan. Confirm your card processes the payment as a regular purchase and not a cash advance. And only do this with money you already owe in taxes, since paying early or overpaying just to earn defeats the purpose. Used deliberately, a tax payment is one of the cleanest ways to turn a large, unavoidable bill into a welcome bonus.
Frequently asked questions
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