With tax season approaching, many people are considering whether it’s worth it to charge their taxes to a rewards credit card in order to earn cash back or points toward travel. While there are generally service charges and fees associated with paying taxes with a credit card, there are still some benefits to consider.
One reason to pay taxes with a credit card is if you need to meet a minimum spending threshold in order to earn a welcome bonus on a new card. This can be especially beneficial if the welcome bonus is worth a significant amount of cash back or points. Additionally, some credit cards offer perks like elite-qualifying miles with an airline card or a free night award with a hotel card when you reach a certain spending threshold.
Another reason to consider paying taxes with a credit card is if you have a card that offers a 0% APR on purchases for a certain timeframe. This can give you some flexibility in paying off your tax bill without accruing interest. However, it’s important to note that if you don’t pay off your balance in full before the 0% APR period ends, you could be subject to high interest charges.
When it comes to the best credit cards for paying taxes, there are several options to consider. The Discover it Miles and PayPal Cashback Mastercard are both popular choices for earning rewards on tax payments. However, it’s important to research the specific earning rates and fees associated with each card before making a decision.
There are several different ways to pay your taxes, including making a direct payment from your bank account, wiring the money from a bank account, or mailing a check or money order to the IRS. If you need more time to pay your taxes, you can file for an extension or set up an installment agreement with the IRS, but keep in mind that penalties and interest may apply.
While there are benefits to paying taxes with a credit card, it’s important to consider the fees associated with this method. Currently, the fees range from 1.82% to 1.98% of the amount paid. This means that if you owe $10,000 in taxes, you could be charged an additional $182 to $198 in fees depending on the payment processor you use.
Despite the fees, there are still reasons why paying taxes with a credit card can be worthwhile. For example, you can earn valuable rewards on your tax payment, especially if you’re trying to meet a minimum spending threshold for a welcome bonus. Additionally, if you have a credit card that offers perks like elite status or free night awards, paying taxes with that card can help you reach those goals.
In conclusion, paying taxes with a credit card can have its benefits, but it’s important to weigh the fees and consider your specific financial situation before making a decision. If you’re able to pay off your balance in full and take advantage of rewards and perks, it could be a smart move. However, if you’re unable to pay off your balance or the fees outweigh the benefits, it may be better to explore other payment options.