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Nothing in life is certain, except death, taxes, and earning credit card rewards with your tax bill. You read that right: turn lemons into lemonade. If you owe federal taxes (or think you might), now is the time to open a new credit card and hit a minimum spend with that tax bill! Using the right card can make this otherwise undesirable time of year a joyous occasion.
Paying Taxes with a Credit Card
There are three official websites that accept credit cards for your federal tax bill:
- www.payusatax.com accepts Amex, Discover, Mastercard and Visa for a fee of 1.96%.
- www.pay1040.com accepts Amex, Discover, Mastercard and Visa for a fee of 1.99%.
- fed.acipayonline.com accepts Amex, Discover, Mastercard and Visa for a fee of 1.99%.
Of these, #1 is the best, but only by a small margin. It is 0.03% cheaper than the other two options, which might add up if you face a large tax bill!
Alternatively, you can use Plastiq. This service allows you to use a credit card for almost anything (Amex has some restrictions) for a fee of 2.85%. Prior to COVID, Plastiq regularly emailed promotions for 1.0% or 1.5% fees on 3 payments up to $10,000 each. However, these have dried up since early 2020. If you've never used Plastiq before, I recommend using it ASAP and then hoping for a promotion email. To sweeten the deal, you can use our referral code (607438) for $500 fee-free dollars!
Either way, you can pay your federal tax bill via credit card for less than 2%.
Best Credit Cards for Tax Bills
The best card for any bill is the card you're working on a minimum spend for a sign-up bonus or opening a new card to hit another sign-up bonus. Always check our monthly recommendations for the best sign up bonuses here. However, if you need to take a break from opening new cards, you're in a time crunch, or you can't get a new card (for whatever reason, we have you covered. Here are our recommended cards for paying taxes and earning rewards that outweigh the 1.96%+ fees:
- Citi Double Cash: You earn 2% cash back with this card (1% when you make a charge and 1% when you pay it off). This is earning a profit of 0.01% when paying your taxes, which is nothing to write home about. However, if you have a Citi Premier or Citi Prestige, you can covert the cash back to ThankYou Points (worth over 1.8 cents each) for 2x earnings on your tax bill. This allows you to “buy” Citi ThankYou Points for about 0.95 cents each, which is well below their value! Details: this card has no sign-up bonus, but also does not have an annual fee and there are no limits on 2x earnings.
- Amex Blue Business Plus: You earn 2 Amex Membership Rewards points per dollar spent, up to $50,000 per year. Afterwards, it is 1x for any additional spend. This allows you to “buy” MRs at 0.95 cents each, which is an instant profit with an Amex Charles Schwab Platinum card (which allows you to cash our MRs at 1.25 cents per point). Amex MRs are worth over 2.0 cents per point, so you earn over 4.0% per dollar spent! Details: this card currently has no sign-up bonus, no annual fee, and offers 2x MRs on all spend, up to $50,000 annually. After $50,000, all earnings are 1x.
- Chase Freedom Unlimited: You earn 1.5 Chase Ultimate Rewards per dollar spent, with no cap. Chase URs are worth over 2.0 cents per point, so you earn over 3.0% per dollar spent. Details: this card has a 20,000 UR sign-up bonus for $500 spent in the first 3 months of account opening. It has no annual fee and earns 1.5x on all spend, 3x on dining and pharmacy, 5x on travel through the Chase Portal, all with no cap, and 5x on groceries (up to $12,000 spend) in the first 12 months (current offer expires January 13, 2021).
- Amex Biz Platinum: If your tax bill is over $5,000 (or any other bills or expenses), you earn 1.5x on those charges. Otherwise, it earns 1x for tax bills. Earning 1.5x for a $5,000+ tax bill nets you over 3.0% in return per dollar spent. Details: this card has a 75,000 MR sign-up bonus for $20,000 spend in 3 months. It has a $595 annual fee.
- Alliant Credit Union Visa Signature Card: 2.5% cash back, up to $250 back per billing cycle (max of $10,000 spend). $99 annual fee, which is waived the first year. This card is one of the highest cash back cards on the market, but the $10,000 cap per cycle isn't very helpful for those with large tax bills.
Although we all dread paying our tax bill, it's easy to turn a cash profit from this unpleasant experience, earn a lucrative sign-up bonus, or both! With fees as low as 1.96%, spending the $3,000 or $4,000 for an average minimum spend requirement costs you only $58.80 or $78.40, respectively. With numerous sign up bonuses worth $1,000 or more, paying your tax bill is a perfect time for a new card. As always, come join us in our Facebook Group to learn many other tips and tricks like this to save money and earn valuable points and miles!