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Here’s how to pay your taxes with a credit card and the best cards to use

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It’s (finally) tax time! Even though the Internal Revenue Service (IRS) delayed this year’s tax deadline to May 17, that revised due date for 2021 is now just around the corner. And given the financial havoc that the coronavirus pandemic wrought, you might be wondering if it makes sense to pay your taxes with a credit card this year.

Paying your taxes with a credit card may sound like a dangerous idea, but there are times when it can make sense. For example, let’s say you’re in a situation where you expect to have the money to pay your taxes but not until a few weeks after the IRS deadline. You can use a credit card as a short-term loan to cover what you owe, then pay your credit card bill when you actually get the cash.

You could also take advantage of a credit card with an introductory 0% interest rate in order to spread your tax payments out over months or even a full year. While the IRS itseslf offers payment plans, the agency will charge you interest for paying over time, which you can avoid by paying with a 0% interest credit card.

Another reason people pay their taxes with a credit card is to earn extra credit card rewards. There are fees involved in doing so, but if you can rack up enough rewards to make them worth more than the fee, you can still end up ahead, so long as you pay your credit card bill in its entirety by the due date to avoid racking up a lot of interest.

Regardless of why you might want to use a credit card to pay your taxes, if you’re going to take the plunge, it’s important that you know how to do it and which cards to use to make the effort worthwhile.

The best credit card to use when you pay your taxes depends a lot on what you hope to accomplish. Do you want to eke out a very small percentage in rewards, or do you hope to use your tax bill to earn a big bonus? Maybe you want to access an introductory 0% APR so you can pay off the balance over time. For each of these scenarios, here are our top picks for paying your taxes with a credit card:

Citi® Double Cash Card: Best for earning cash back

Chase Freedom Unlimited: Best introductory 0% APR offer

Chase Sapphire Preferred Card: Best sign-up bonus

Capital One® Venture® Rewards Credit Card: Best for flexible travel rewards

Hilton Honors American Express Surpass® Card: Best hotel spending bonus

The Blue Business® Plus Credit Card from American Express: Best for business taxes

Each of these cards can be a great choice to use for paying your taxes, but before we dive into the details of what makes each card a good option, let’s explore the process of paying your taxes with a credit card so you know how to do it.

The US government itself actually doesn’t accept credit cards for tax payments. However, it has authorized three different companies to process federal tax payments made with plastic on its behalf. Each of these companies charges a fee as a percentage of your tax payment when you pay with a credit card, so it’s important to keep in mind this cost when using your card to pay your tax bill.

Fees vary depending on which company you use and whether you’re paying the IRS with a credit card or a debit card. Here’s a summary of the companies who accept credit cards for federal tax payments, and the fees each one charges as of this writing:

PayUSAtax Pay1040 ACI Payments, Inc.
Website payusatax.com pay1040.com fed.acipayonline.com
Credit card fees 1.96% (minimum fee of $2.69) 1.99% (minimum fee of $2.58) 1.99% (minimum fee of $2.50)
Debit card fees $2.55 $2.58* $2.00 or $3.95 for tax payments over $1,000
* Consumer and personal debit cards only. The fee for all other debit cards is 1.99% ($2.58 minimum).

In order to pay your taxes with a credit card, you’ll need to go to the website of the company you want to use and make the payment there instead of with the IRS. You’ll have to provide all your basic information to pay this way, such as your name, address, date of birth, contact info and taxpayer identification number (which for individuals is usually your social security number).

Pro tip: Many states also let you pay state taxes with a credit card, so make sure to check for this option based on where you live. Don’t forget to compare the fees at multiple companies (if available) for paying state taxes with a credit card, which are often similar to the fees charged to pay your federal taxes with plastic.

As you can see from the chart, the minimum percentage you’ll have to fork over to pay your federal taxes with a credit card is 1.96%. This is a huge deterrent for rewards enthusiasts since many cash back credit cards offer less than 1.96% in rewards, meaning you’d be paying more in fees by using a credit card than you’d get back in rewards.

But with that being said, there are a few select credit cards that offer a higher earning rate or other incentives that can make using a card worth the cost. Let’s take a look at the best options.

The Citi Double Cash Card can make sense if you have a large tax bill and you want to end up slightly ahead in rewards. This card earns 2% back for every dollar you spend — 1% when you make a purchase and another 1% when you pay it off.

When you’ve earned at least $25 in cash back with the card, you can redeem it by getting a check in the mail, statement credits on your account or credits to a linked account. But if you have a Citi Premier℠ or Citi Prestige® Card, you can also convert your cash back to Citi ThankYou points, which can potentially increase the value of your rewards and make paying your taxes with the card an even better deal.

There’s no annual fee on the Citi Double Cash Card and you even get access to a 0% introductory APR on balance transfers for 18 months, after which you’ll pay a variable APR of 13.99% to 23.99%. That can be useful if you have existing debt on another credit card and need time to pay it off without racking up a lot of interest.

Related: Read CNN Underscored’s review of the Citi Double Cash Card.

If you want to earn credit card rewards on your taxes but your primary focus is to get some extra time to pay your taxes without incurring a lot of interest, the Chase Freedom Unlimited offers the best of both worlds.

This card earns 1.5% cash back on all purchases, including your tax bill. But to help you save on interest, the Chase Freedom Unlimited also gives new card holders an introductory 0% APR on purchases for the first 15 months after you open the account. Keep in mind that once the 15 months are up, the APR rises to a variable 14.99% to 23.74%, so it’s important to pay the balance in full before that.

The Chase Freedom Unlimited has no annual fee and also earns 5% back on travel purchases made through Chase and on Lyft rides (through March 2022), as well as 3% back on dining and drugstore purchases. And if you also have a Chase Sapphire Preferred or Chase Sapphire Reserve, you can convert your cash back into points that can be used for travel at even better redemption rates.

Related: Earn $200 in bonus cash back with this Chase Freedom Unlimited offer.

If you want your tax bill to translate into a huge sign-up bonus, the Chase Sapphire Preferred is almost certainly your best bet right now. This card is currently offering 80,000 bonus points when you spend $4,000 within three months of opening the account, plus up to $50 in statement credits for grocery purchases made in your first 12 months. That’s the highest bonus we’ve ever seen on this card.

Use your tax bill to earn a big sign-up bonus on the Chase Sapphire Preferred that you can redeem down the line for a beach vacation.

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Use your tax bill to earn a big sign-up bonus on the Chase Sapphire Preferred that you can redeem down the line for a beach vacation.

You’ll also earn 2 points for every dollar you spend on travel and dining purchases with the Chase Sapphire Preferred, 5 points per dollar on Lyft rides (through March 2022) and 1 point per dollar on all other purchases.

The card has a $95 annual fee, and the fact you’ll only earn 1 point per dollar on your tax bill is a major downside. However, it’s important to understand that the sign-up bonus of 80,000 points can be worth a whopping $1,000 when you redeem those points for travel via the Chase travel portal or by using the card’s “Pay Yourself Back” tool.

Also, Chase’s Ultimate Rewards program lets you transfer points to 13 popular airline and hotel partners, including United Airlines, Southwest, Hyatt and Marriott hotels. It takes a little extra time and effort to use your points this way, but you can potentially get even more value for your rewards when you transfer them, especially when redeeming them for first or business class flights.

Related: 6 reasons to get the Chase Sapphire Preferred.

The Capital One Venture Credit Card should also be on your list if you want to use your tax bill to earn flexible travel rewards. This card earns 2 miles for each dollar you spend on everything you buy, and rewards can be redeemed for travel at a rate of 1 cent per mile. However, you can also transfer your miles to an array of Capital One airline and hotel partners and potentially get even more value.

A $95 annual fee applies, but you also get up to $100 in credits toward Global Entry or TSA Precheck membership. And right now new card holders can earn up to 100,000 bonus miles, though it requires spending a lot more money than the Chase Sapphire Preferred. You’ll earn 50,000 miles when you spend $3,000 on purchases in the first three months after opening the account, and an additional 50,000 miles when you spend $20,000 on purchases in the first 12 months from account opening.

Related: Earn up to 100,000 bonus miles with the Capital One Venture credit card.

You may not know that It’s possible to earn a free hotel night just by paying your taxes. But take a closer look at the Hilton Honors American Express Surpass Card to see how it can work.

The Hilton Surpass card earns a free weekend night when you spend $15,000 on it within a calendar year. That means if you have a large tax bill, you could potentially pay it entirely on this card and bank a free weekend night at a Hilton hotel for the future. Even better, right now because of the pandemic, all weekend nights issued in 2021 can be used on any night of the week, not just weekends.

You’ll also earn 12 points for every dollar you spend on Hilton purchases with the Hilton Surpass card, 6 points per dollar at US restaurants, US supermarkets and US gas stations and 3 points per dollar on all other purchases, including your tax bill. Other benefits of the card include automatic Hilton Honors Gold elite status and 10 Priority Pass airport lounge visits each year.

And if you don’t already have the Hilton Surpass card, right now you can earn up to 180,000 bonus points — 130,000 points when you spend $2,000 in purchases in the first three months after opening the account, plus an additional 50,000 points after you spend $10,000 total within the first six months. Just keep in mind that the card does have a $95 annual fee (see rates and fees).

Related: Earn free nights and get elite status with the Hilton Honors Amex Surpass card.

The Blue Business® Plus Credit Card from American Express is a great choice for small businesses if you need to pay your business taxes with a credit card, and for more reasons than one. First, this card earns 2 points for every dollar you spend on all purchases, up to $50,000 each year, after which you’ll earn 1x points. There’s no annual fee, either (see rates and fees).

American Express Membership Rewards points can be redeemed for cash back, used for Amazon purchases or to pay for travel at American Express Travel. But the best way to use them is by transferring them to one or more of Amex’s 21 airline and hotel partners, which include Delta, JetBlue, Air Canada, British Airways, Marriott and many others.

As an added bonus, new Blue Business Plus card members get a introductory 0% APR on purchases for the first 12 months after opening the account, after which you’ll pay a variable APR of 13.24% to 19.24% based on your creditworthiness (see rates and fees). In summary, this is a card that can both earn rewards on your business taxes and also let you pay down your tax bill over an entire year without interest.

Related: Read CNN Underscored’s review of the Blue Business Plus card.

Make sure you have a plan if you intend to pay your taxes with a credit card.

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Make sure you have a plan if you intend to pay your taxes with a credit card.

While all these credit card offers are enticing, you should only pay your taxes with a credit card if you have a plan. If you want to earn rewards, for example, you’ll need to have the cash set aside to pay your credit card bill in full before you start getting charged interest. Or if you want to take advantage of an introductory 0% APR, you’ll need to figure out how much to pay each month so your tax bill doesn’t linger beyond the expiration date of the introductory offer.

In summary, there are a few situations where it can make sense to pay taxes with a credit card:

  • Your bill is due and you need more time to pay it
  • You want to pay your tax bill with a credit card that offers an introductory 0% APR offer so you can avoid interest while you make payments
  • You want to earn rewards with a credit card and you have the capacity to pay your bill in full before interest starts being charged
  • You have the money to pay your tax bill, but you want to use the expense to earn a big credit card welcome bonus or spending perk like a free hotel night

In the end, if you want to pay your taxes with a credit card, you should have a reason and a strategy in place. It can be a smart move, but only under the right circumstances, and only if it makes sense for your personal financial situation.

Learn more about the Citi Double Cash Card.

Learn more about the Chase Freedom Unlimited.

Learn more about the Chase Sapphire Preferred.

Learn more about the Hilton Honors Surpass Card.

Learn more about the Blue Business Plus from American Express.

Looking for a new credit card? Check out CNN Underscored’s list of the best credit cards of 2021.

Get all the latest personal finance deals, news and advice at CNN Underscored Money.

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