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Can you pay taxes with a credit card?

man paying bills online with a credit card
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Whether you’re looking for a way to pay off an emergency expense or a way to earn credit card rewards, you might be wondering whether there is any benefit to paying taxes on credit.

Unfortunately, putting taxes on a credit card is often a losing game.

“As a small business owner I typically have a pretty large tax bill,” says Matthew Robbs of SmartSavingAdvice, a website designed to help people make smart financial decisions. “I have looked into paying taxes on my credit card, but many people don’t realize that there is a 2 percent fee to do so. If you only get 1 percent in cash back or miles on your tax payment, you are actually losing money by paying your taxes via a credit card.”

In addition to losing money on fees, you also run the risk of turning your outstanding tax balance into an outstanding credit card balance. Putting your tax payment on a credit card could cost you extra money every month in the form of interest charges—unless, of course, you choose a credit card with an introductory zero percent interest rate—and paying your taxes on credit could increase your credit utilization ratio to the point that it lowers your credit score.

Can you earn rewards by paying taxes with a credit card?

Some people wonder if paying taxes with a credit card could help them earn credit card sign-up bonuses or other top credit card rewards. The good news is that it is possible to earn credit card rewards for your tax payment. The bad news is that the fees associated with putting your taxes on credit could cancel out many of the rewards you earn.

“The only way you are able to actually make money by paying your taxes with a credit card is if you get more than 2 percent cash back,” says Robbs. While many of today’s best cash back cards offer more than 2 percent cash back on popular spending categories like groceries or gas, tax payments rarely qualify for more than the baseline rewards rate—1 percent or 1.5 percent, in most cases.

Even if you have a card that offers 2 percent cash back, it will cost you between 1.87 percent and 1.98 percent of your total tax payment to use a qualifying IRS credit card payment processor. At best, you’ll break even, and the value of your credit card rewards could be lower than the money you pay in fees.

“Paying your taxes via credit card is not a good option because of the 2 percent fees that the IRS charges to make a credit card payment,” Robbs explains.

The bottom line

It’s possible to pay taxes with a credit card, but it isn’t recommended. The risk of getting into credit card debt is too high, and the rewards you might earn from putting your taxes on credit are too low.

If you’re thinking about putting your taxes on credit to earn cash back, points or miles, make sure any rewards you earn are higher in value than the fees associated with the credit card payment. Otherwise, you’ll lose money overall—and that’s before you consider any interest charges you may incur if you don’t pay off your tax payment in full.

If you can’t afford to pay your taxes, consider applying for an IRS Payment Plan instead of putting your payment on a credit card. If you want more information about how to pay your taxes or what to do if you can’t pay your tax bill, we’ve got a helpful tax guide to get you started.

Written by
Nicole Dieker
Personal Finance Contributor
Nicole Dieker has been a full-time freelance writer since 2012—and a personal finance enthusiast since 2004, when she graduated from college and, looking for financial guidance, found a battered copy of Your Money or Your Life at the public library. In addition to writing for Bankrate, her work has appeared on CreditCards.com, Vox, Lifehacker, Popular Science, The Penny Hoarder, The Simple Dollar and NBC News. Dieker spent five years as writer and editor for The Billfold, a personal finance blog where people had honest conversations about money. Dieker also teaches writing, freelancing and publishing classes and works one-on-one with authors as a developmental editor and copyeditor.
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