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It’s that time of year again. Tax season is upon us — and if you’re part of the 27% of taxpayers who expect to owe money this year, it’s time to figure out how you’ll pay.
What if you paid your tax bill with a credit card? On the surface, it seems like an easy way to rack up some rewards — and avoid paying the entire bill upfront. But is it really a smart financial move or just asking for trouble? Here’s what you need to know.
Yes, you can pay taxes with a credit card.
The IRS allows you to pay your federal income taxes by credit card. But you often must pay a processing fee, typically around 2% of the total payment. So, the more you owe, the higher the fee. Some states also let you pay state income taxes with a credit card, though they’ll also charge a convenience fee.
The easiest (and most affordable way) to pay your tax bill is IRS Direct Pay. You can submit a payment directly from your bank account to the IRS for free. If you use a tax preparation software, you can often pay for free using electronic transfer.
If you plan on paying your taxes with a credit card, here’s what you need to know.
- Make sure you can. After selecting the processor, click the processor’s “make a payment” option. You’ll then move to the processor’s portal to complete your payment.
- Choose a processor. PayUSAtax, Pay1040, and ACI Payment, Inc. all accept major credit cards, including Visa, Mastercard, American Express, and Discover. Some may accept digital wallets like Venmo and PayPal. Each has their own fees, so make sure you read the fine print.
- Make a payment. After selecting the processor that fits your payment method, click the “make a payment” option. You’ll then move to the processor’s portal to complete your payment.
Paying your taxes with a credit card isn’t the best route for everyone, says Kevin Matthews II, founder of BuildingBread, a financial education company.
“I would not recommend paying with a credit card,” he says. “There’s an additional fee of about 2%, and if the credit card isn’t paid in full, you could also pay interest on the debt.”
But paying taxes with a credit card can make sense in certain situations — mainly if you can pay the balance off in full. This includes if you want to:
For some, it’s not about lacking the money to pay your bill, but rather the ability to earn rewards on a large expense.
“If you have the cash to pay the credit card off in full, but you’re using it to rack up rewards, it could make sense, too,” Matthews says. “[But] remember to calculate the IRS’s fee into that equation, as it may negate any potential benefits.”
As you weigh whether paying taxes with plastic is right for you, here are some good questions to consider:
Yes, you generally can pay taxes with a credit card. But just because you can doesn’t mean you should.
Knowing the fees and the risks can help you decide if it’s a smart move. In some cases, paying taxes via plastic can be a strategic money move. But it’s important to plan to maximize the rewards without taking on expensive credit card debt.
Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.