Posted byon April 13, 2016
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Paying taxes with credit cards is one of the ideas that usually triggers a “don’t ever do that” response.
However, the reasoning is usually because of the excessive processing fees that are passed along. What if, your cash back credit cards offer you more in cash back rewards than the fee?
The IRS directs you to use one of the following processing companies to make your tax payments by credit card. Here are the fees that each of the processing companies charges:
The minimum processing fees range from $2.50 to $3.50.
Meet Spending Requirements for a Bonus. If you need to meet spending requirements to earn a sign up bonus, the bonus may offset the fee.
We’re working on meeting the spending requirements for our latest $4,500 Credit Card Application Spree. Be sure to calculate the amount you’ll earn and the amount you’ll spend to see if it’s worthwhile.
Use a Cash Back Card. If you aren’t working on any sign up bonuses, but you have a cash back credit card that pays more than the fee, there is still the potential for a small profit margin. I have used our Capital One Venture card in the past since it earns the equivalent of 2% back.
Here’s an example on the math from our tax payment last year to Earn a Profit Paying Your Taxes with a Credit Card.
Fees can be tax deductible. The convenience fee is tax deductible on business tax payments and on qualified personal tax payments.
Quarterly payments. This isn’t just an option for the upcoming tax deadline. You can also make payments all year for your taxes next year.
Taxes on rewards. You do not have to report or pay taxes on cash back rewards for using credit or debit cards. For more see credit card rewards aren’t taxable.
Have you paid your taxes with a credit card before?