Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer.
It's possible to pay the IRS with a credit card, but you have to pay a fee. Depending on which payment processor you choose, you may end up paying between 1.87% and 1.99%. Those who file their taxes electronically, through a service like TurboTax, will face higher fees, usually over 2.3%. You also have the option to pay your taxes using a debit card instead of a credit card, for a much lower fee. Debit payments are usually a flat fee between $2.00 and $3.95.
While paying with debit may cost less, paying taxes with a credit card can be worth it if you earn credit card rewards that are worth more than 2% of your payment.
Paying taxes with a credit card
If you are filing your taxes on your own and want to pay your taxes using a credit card, you will have to use one of the IRS's approved processors. Currently, the IRS relies on PayUSAtax.com, Pay1040.com and OfficialPayments.com. These companies all charge different rates for the service, so you should choose one that makes the most sense for you.
|Payment Processor||Credit Card Fee||Debit Card Fee||Note|
|PayUSAtax.com||1.96% or $2.69, whichever is greater||$2.55||Not recommended|
|Pay1040.com||1.87% or $2.59, whichever is greater||$2.58||Best for credit card payments|
|OfficialPayments.com/fed||1.99% or $2.50, whichever is greater||$2.00, and $3.95 for payments over $1,000||Best for debit card payments below $1,000|
When you file your taxes electronically, you will often have the option to make a payment through your tax preparation software. These can impose different fees, depending on the service you use. For example, TurboTax charges a 2.49% fee, with a minimum convenience fee of $3.95. Note that these fees can vary and change year to year.
There are more ways to cover your taxes with a credit card, but they should be avoided. For example, your card company may mail you a check called a convenience check, which you could in theory use to pay. However, the fees associated with this type of transaction are extremely high. We don't advise anyone to ever pay with a convenience check.
Should you pay your taxes with a credit card?
Despite the fees, it can be beneficial to pay the IRS using a credit card. Whether the pros outweigh the cons depends on the individual and what kind of credit card they're using.
The chief reason to pay with a credit card is to earn rewards. If you have a cash back credit card, you can get as much as 2.5% back on the payment you make. However, be aware that most credit cards provide cashback rates at around 1.5% or less. That means the payment processing fees would greatly outweigh these rewards. However, if you have a 2% cash back card, you can still pay using either PayUSAtax.com or Pay1040.com, and still come out slightly ahead.
If you use a travel rewards credit card, there are instances where you can come out ahead. For example, if you were to pay your business taxes with The Blue Business® Plus Credit Card from American Express, you would earn 2 points per dollar. If you value American Express Membership Rewards points at 1.5 cents per point, that would a 3% rebate versus the 2% fee the processor would charge.
Another advantage of paying your taxes with a credit card is that it can automatically serve as an extension. If you pay part, or least $1, of your tax estimate, you will no longer need to file Form 4868. Keep in mind that this on its own is probably not worth the processing fee. You should avoid paying taxes with a credit card with the intention to carry a balance. Interest charges on a credit card can get very high — much higher than other types of loans. The average APR on a credit card is currently around 14%. If you can't afford to pay your taxes in full, consider using an IRS payment plan.
Credit cards for paying your taxes
If you are considering paying your taxes with a credit card, there are plenty of options to choose from. Here are a few options that will likely outearn the processing fees.
|Card||Rewards rate||Intro APR||Rationale|
|The Blue Business® Plus Credit Card from American Express||Earn 2x Membership Rewards on purchases up to $50,000 (See terms)||0.0% intro APR on purchases and balance transfers for 12 months from date of account opening (then 13.24% - 19.24% Variable) (See rates & fees)||Since many travel rewards experts value Membership Rewards at 2 cents per point, you can potentially earn 4 cents per dollar in points value on your tax payment, as long as you’re under the $50,000 threshold. Also, there's No annual fee.|
|Chase Freedom Unlimited®||Unlimited 1.5% cash back on all purchases||0% intro APR for 15 months from account opening on purchases and balance transfers (then 16.49% - 25.24% Variable)||You can transfer points to a premium Chase card, such as the Chase Sapphire Reserve®.
Chase Sapphire Reserve® points are valued at 1.5 cents per point. This nets you 2.25 cents per dollar in points.
|Capital One® Venture® Rewards Credit Card||Unlimited 2x per dollar on every purchase||None||Capital One miles are transferable to a list of travel partners. If you can redeem them from there for more than 1 cent per mile, it may be worth it to pay your taxes with this credit card.|
|Alliant Cashback Visa® Signature Card||2.5% cash back, up to $10,000 in qualifying purchases per billing cycle||None||The Alliant Cashback Visa® Signature Card will help you beat the fees for filing your taxes and your day-to-day purchases thanks to its 2.5% cash back rate.|
Paying taxes with a credit card vs. an IRS installment agreement
In many cases, setting up an installment agreement with the IRS is much less costly than carrying a balance on a credit card. If you owe $50,000 or less in combined individual income tax, penalties and interest, and you have filed all your required returns, you may be eligible to set up an installment agreement. You will owe interest to the IRS until your balance is paid, but usually at a much lower rate than a credit card. One thing to keep in mind: You may have to fork over a hefty setup fee, depending on the type of payment plan and your income. You can get this fee reduced if you set up a direct debit plan or if your income is sufficiently low (at or below 250% of the Department of Health and Human Services poverty guidelines).
If you want to compare your installment agreement fee against the interest you'd pay for carrying a balance on a credit card, we suggest using our interest calculator. Remember to add the 2% processing fee to your starting balance.
Visualizing Your Debt Burden
To help you track how quickly your balance will be affected under your current payment plan, we graphed your progress over time below.
The information related to the Chase Freedom Unlimited® has been independently collected by ValuePenguin and has not been reviewed or provided by the issuer of this card prior to publication.