Should you Pay Taxes with a Credit Card? [2024]

Updated Jan 2024 to reflect that PayUSATax decreased their fee from to 1.82%.

Should you pay taxes with a credit card?

There is one credit card that I would pay my taxes on (and advise you to) without blinking an eye.

What in the world is Dave on about? There are FEES when you pay taxes with a credit card!!!!

That’s true. 

But hear me out. And first, I must clarify that for everything I’m going to write in this article, I am making the assumption that you have the funds to simply mail the IRS a check and would prefer to pay, effectively, less if you could. If you cannot repay the credit card in full when the statement is due, then do not continue reading. Consult your tax advisor or financial planner in that case.

The “can’t lose” profit paying taxes

You can pay tax using a credit card with a 1.82% fee at PayUSATax. With the Citi® Double Cash credit card, you earn 2% cash back (1% when you spend and 1% when you pay the bill).

So, you will profit 0.18% no matter what. The absolute worst case is that for a $10,000 tax bill, you make $18.

I know, that doesn’t sound like much – and it’s not – but it’s the optionality of the Citi Double Cash credit card when combined with a Citi Premier or Prestige card that makes this so appealing. The unique ability of the Citi Double Cash to earn 2% in cash back off the bat with the option to convert those, 1 to 1, to Citi ThankYou points later is what makes this so attractive.

I wrote this article last year about the Citi Trifecta (or even Quadfecta). It discusses how you can earn 2% cash on the Double Cash but then opt to convert to ThankYou points later.

Cash Now or Points Later

This is so key right now. If we aren’t “back to normal” in 3-6 months, you may want the cash. If you paid $50,000 in tax liabilities, you paid $910 in fees and earned $1,000 in cash back. You’re net positive $90.

You have $1,000 in your cash back account which you can get deposited straight into your bank account, but there’s no rush.

Maybe in a year you want to book a round trip from New York (Newark) to Los Angeles in Business Class. If you can find the award space, you could book that for just 25,000 Turkish miles (total, round trip). Those miles can be transferred 1:1 from ThankYou points.

So, you transfer $250 worth of points into ThankYou points, becoming 25,000 ThankYou points. You transfer those to Turkish and book your flights. (Note: there is a delay of 1-2 days to transfer ThankYou to Turkish so in reality you’d probably want to transfer once you had a hunch you could find flights that worked).

You just got a flight worth $800 ++ and have $750 left over from your $1,000.

You aren’t buying points – you’re acquiring optionality on them.

That’s my stock market brain comparing this idea to buying options, although in this case you are being paid 0.18% to TAKE them. You don’t have to pay a premium like you would for a stock option. Even if you didn’t have (or keep) a Citi Premier® or Prestige to be able to transfer down the road, your worst case is a 0.18% gain.

Get 60,000 Citi ThankYou points when you spend $4,000 in 3 months. Using Turkish as a transfer partner, this could be worth 2 round trip domestic flights in Business Class or just 30,000 points shy of a roundtrip flight to Europe in Business Class! Get This Offer

Do you pay taxes with a credit card?

Let me know below in the comments, on Twitter, or in the private MilesTalk Facebook group. And don't forget to follow me on Instagram for all sorts of tips on miles, points, credit cards, and travel.

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You can find credit cards that best match your spending habits and bonus categories at Your Best Credit Cards. 

New to all of this? My “introduction to miles and points” book, MilesTalk: Live Your Wildest Travel Dreams Using Miles and Points is available on Amazon and at major booksellers.