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The IRS allows you to pay your federal tax bill with a credit card. But it hands processing the payment off to two third-party processors, and those processors charge a fee for the service.
That fee is where the math either works for you or doesn’t.
What it actually costs
The two authorized processors right now are Pay1040 and ACI Payments. Pay1040 charges 1.75% with a $2.50 minimum. ACI Payments charges 1.85%, also with a $2.50 minimum. Neither of those fees goes to the IRS, but they’re the processor’s cut for facilitating the transaction.
On a $3,000 tax bill, you’re paying around $52 to $55 in fees. On a $10,000 bill, somewhere in the $175 to $185 range. If you pay through tax software instead, the fees run higher — TurboTax, for example, charges 2.49% for credit card payments made through its platform.
One thing worth knowing: Both processors confirm that the charge runs as a purchase, not a cash advance, so you won’t get hit with the higher cash advance rate your card would otherwise apply.
When it makes sense
For most people, paying taxes with a credit card is a losing trade. If your card earns 2% cash back on everything, you’re collecting somewhere between $15 and $25 on a $10,000 payment after fees eat through the rest. That’s not nothing, but it’s probably not worth the extra step.
The scenario where it actually pays off is a sign-up bonus.
If your tax payment pushes you over the spending threshold needed to earn a welcome offer, the math can shift dramatically in your favor. A card offering 75,000 bonus points for $4,000 in spending within three months is a very different calculation than one offering 1.5% back on purchases. The fee becomes the cost of unlocking a much larger reward.
If you’re strategically timing a new card application around tax season and your bill is large enough to get you most of the way to a bonus, this is one of the better arguments for it. You can compare some of the top sign-up bonus offers available right now, right here.
When it doesn’t
If you can’t pay the card balance in full right away, stop here. Credit card interest rates are typically over 20% APR. An IRS installment plan, by comparison, runs closer to 7% to 8% annually in combined interest and penalties. If you don’t have the cash to pay the card off immediately, you’re almost certainly better off setting up a payment plan directly with the IRS.
Same goes if you’re just hoping to earn regular rewards on the spend. A 2% cash back card nets between $15 and $25 in actual rewards on a $10,000 tax bill after fees, depending on which processor you use. That’s not a compelling reason to change your payment method.
How to actually do it
Go to IRS.gov and select your payment processor. You’ll enter your card information, confirm the fee before the charge is authorized, and get a confirmation number. Your statement will show the payment as “United States Treasury Tax Payment” and the fee as a separate line item. Keep both for your records.
If you want to split a large bill across multiple payments to stay under your credit limit or spread the spend across two cards, the IRS does allow multiple payments, though the number of times you can pay depends on what type of tax you’re paying.
Is it worth it for you?
Paying your taxes with a credit card is worth it in one specific situation: you’re chasing a sign-up bonus, the fee is smaller than what you’d earn, and you can pay the card off before interest kicks in. Outside of that, it’s an expensive way to collect a small amount of rewards.
If you’re in that situation and looking for a card worth applying for, here are some of our top picks.
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