Paying taxes isn’t fun, but did you know paying the IRS with a credit card could potentially help you earn rewards, hit a welcome bonus, or improve cash flow? While credit card payments come with processing fees, strategic taxpayers can still come out ahead. Let’s break down the benefits, drawbacks, and when it actually makes financial sense.
Table of Contents
Benefits of Paying the IRS with a Credit Card
1. Earn Rewards & Cashback
If your credit card offers cashback, points, or miles, you can offset the payment processing fees. For example:
- A 2% cashback card earns $20 per $1,000 paid in taxes.
- A travel rewards card earning 2X points per dollar gives you 2,000 points per $1,000 paid—often worth more than the fee.
2. Hit a Sign-Up Bonus Faster
Many premium credit cards offer big welcome bonuses if you meet a spending requirement within the first few months. Paying taxes with a credit card can help:
- A card requiring $4,000 spend in 3 months can be met quickly if you owe at least that in taxes.
- If the bonus is 60,000 points worth $900 in travel, paying the fee could be well worth it.
3. Interest-Free Float & Cash Flow Management
Using a credit card lets you delay an actual cash outflow until your next billing cycle. If you need extra time, you can also:
- Use a 0% APR card to avoid interest for several months.
- Free up cash for investments or emergencies.
4. Built-in Protections & Perks
Credit cards offer fraud protection and better tracking than direct debit or checks. Some premium cards even provide additional benefits like purchase protections or extended warranties, which can be useful for self-employed individuals or businesses.
The Cost: Understanding the Processing Fees
The IRS and state tax agencies allow credit card payments but charge a fee, typically around 1.85%–1.98%. Here’s what that looks like in real numbers:
| Tax Payment | Processing Fee (1.87%) | 2% Cashback Earned | Net Gain/Loss |
|---|---|---|---|
| $1,000 | $18.70 | $20.00 | +$1.30 |
| $5,000 | $93.50 | $100.00 | +$6.50 |
| $10,000 | $187.00 | $200.00 | +$13.00 |
For cashback cards offering at least 2%, you come out ahead. The same applies if you’re earning high-value travel points or chasing a bonus.
What If Your Card Only Earns 1% Cashback?
Even if your credit card only earns 1% cashback, paying the IRS with a credit card can still be worth it—if you’re working toward a valuable welcome offer. Let’s break it down with real numbers.
Assume your card requires $4,000 in spending within 3 months to earn a welcome bonus of 60,000 points (worth around $900 in travel). You’re thinking of using your tax payment to meet that spend.
| Tax Payment | Processing Fee (1.87%) | 1% Cashback Earned | Bonus Value | Approx. Net Gain |
|---|---|---|---|---|
| $4,000 | $74.80 | $40.00 | $900.00 | $865.20 |
| $5,000 | $93.50 | $50.00 | $900.00 | $856.50 |
| $10,000 | $187.00 | $100.00 | $900.00 | $813.00 |
As you can see, even with just 1% cashback, the value of the welcome bonus far outweighs the processing fee—especially if you were already planning to make that tax payment.
When It Makes Sense to Pay Taxes with a Credit Card
✅ If the rewards outweigh the fee – Cards with 2%+ rewards, lucrative miles, or valuable welcome bonuses make this strategy worthwhile.
✅ If you need to meet a minimum spend – A big tax bill can help you unlock a credit card’s sign-up bonus.
✅ If you want to extend cash flow – Especially with 0% APR cards, this can help spread payments interest-free.
❌ When it doesn’t make sense – If your card earns less than 1.85% back and you’re not working on meeting the minimum spend for a sign-up bonus or if you carry a high-interest balance, the fees will likely outweigh the benefits.
How to Pay Taxes with a Credit Card
- Choose an IRS-approved payment processor: Options include Pay1040, and ACI Payments, each charging 1.85%–1.98% fees.
2. Pick a rewards-earning credit card that maximizes points, cashback, or bonuses.
3. Make your payment before the tax deadline to avoid penalties.
Pro Tip: If Paying with a Business Card, do it through PayPal to Save on Fees
If you’re using a business card to pay your taxes, there’s a clever way to lower the credit card processing fee from 2.95% to just 1.85%.
Here’s how the hack works:
- Choose ACI Payments as your IRS payment processor.
- When asked for a payment method, select PayPal.
- Pay via PayPal linked to your business credit card (like the Ink Business Preferred, Amex Business Gold, etc.).
- ACI treats it like a debit card or PayPal transaction, charging only 1.85% instead of 2.95%.
🚨 Important: This may not work with personal credit cards, and ACI could change this at any time, so double-check the final fee before submitting.
This is a great workaround for small business owners looking to earn rewards or meet minimum spend while saving significantly on processing fees.
Best Credit Cards for Paying Taxes
If you’re considering paying the IRS with a credit card, here are two top picks that offer great rewards and generous welcome bonuses—making them ideal for turning your tax payment into serious value.
1. Capital One Venture X
- Earns 2X miles on every purchase, including tax payments.
- At the time of this post, it offers a 75,000-mile welcome bonus after spending $4,000 in the first 3 months.
- That bonus is worth at least $750 toward travel—or more when transferred to airline partners.
Why it works for taxes: Since it earns 2% back, it offsets the ~1.87% credit card processing fee—and you still come out ahead even before the bonus.
2. Chase Sapphire Preferred
- Currently offering an elevated 100,000-point sign-up bonus (after $5,000 in 3 months) at the time of this post.
- Points are worth 25% more when redeemed through Chase Travel, making the bonus worth at least $1,250 in travel.
- Earns 1x on taxes, but the bonus makes the strategy highly worthwhile.
Why it works for taxes: While it only earns 1x on tax payments, it’s an excellent card to meet the minimum spend and unlock the biggest bonus Chase has offered recently.
Final Verdict: Is Paying the IRS with a Credit Card Worth It?
For most taxpayers, paying the IRS with a credit card can be a smart financial move—but only if the rewards justify the processing fees. If you’re earning high-value travel points, cashback, or meeting a bonus requirement, it’s a no-brainer. However, if you’re paying interest on your card or earning low rewards, it’s best to use another payment method.
Would you consider paying taxes with a credit card? Let me know in the comments!
✨ Looking to use your tax payment to kickstart your rewards journey? Start here with my favorite beginner credit card picks.