Can you pay taxes with a credit card? (2024)

If you owe taxes to the IRS, you may have wondered if you can pay with a credit card instead of cash. The ability to funnel a large transaction through a rewards credit card could mean lots of cash back or travel rewards. It may even give you the opportunity to earn a welcome bonus or two, or take advantage of an introductory 0% interest rate that allows you to pay off your tax bill over time.

So, can you pay taxes with a credit card? Absolutely — the IRS gives you a few options to do it. But whether you should is highly dependent on your situation. Let’s take a look at how to pay taxes with a credit card and help you decide if it’s a good idea.

Can I pay taxes with a credit card?

Yes, you can pay federal personal and business taxes (and sometimes state and property taxes, depending on where you live) with a credit card. While the IRS doesn’t accept credit card payments directly, it works with intermediaries that will process your payment. Through these services, you can pay with Visa, Mastercard, Discover and American Express. You can also pay via digital wallets such as PayPal and Click to Pay.

You can even split your payment between multiple credit cards if you like. This can be helpful if your tax bill is larger than your credit limit, or if you’re trying to achieve welcome bonuses on multiple credit cards.

Depending on the type of tax payment and tax year you’re paying, there are restrictions surrounding how many credit card transactions you can make. The IRS Frequency Limit Table by Type of Tax Payment shows that you can pay current tax due on a Form 1040 with two credit card transactions per year — unless you’re on a payment plan, in which case you can make two credit card transactions per month.

How do I pay taxes with a credit card?

The IRS authorizes three payment processors to accept tax payments. You can complete this process online or by calling:

• payUSAtax (844-729-8298).
• Pay1040 (888-729-1040).
• ACI Payments, Inc. (800-272-9829).

Each of the services charges fees totaling less than 2% of your transaction (we’ll cover those in a minute). You can also pay your taxes with a third-party service such as Plastiq — but expect to pay a fee of up to 2.9%.

What are the fees for paying taxes with a credit card?

Each of the IRS-approved payment processors charge a fee for processing your credit card transaction. The good news for businesses is that card processing fees are tax deductible for business purposes. Here’s what you’ll pay:

• payUSAtax — 1.85% (minimum $2.69 fee).
• Pay1040 — 1.87% (minimum $2.50 fee).
• ACI Payments, Inc. — 1.98% (minimum $2.50 fee).

If you pay your taxes with a credit card but can’t afford to pay in full when the bill comes due, you’ll pay interest on any balance you carry. That’s why throwing a big expense on your card may not be a good idea. If you’re thinking of paying your taxes with a credit card simply because you don’t have the money, you could find yourself paying many hundreds of dollars per month in interest.

For those who are unable to pay their tax bill by the due date, the IRS offers monthly payment plans, which currently incur 7% interest plus possible penalties and fees. That’s far more reasonable than the interest you can expect to pay on rewards credit cards, which often charge interest rates of 20% or more. For example, the Chase Sapphire Preferred® Card incurs a 21.49%-28.49% Variable APR.

Alternatively, you may be able to take out a personal loan with a reasonable interest rate to repay the IRS. That way you’ll owe money to the bank instead of the government.

How does paying taxes with a credit card affect my credit score?

When you pay the IRS using a credit card, there’s a good chance your credit utilization ratio will increase.

Credit utilization is the percentage of available credit that you’re using, both per credit card and overall. Experian, one of the major credit bureaus, says a credit utilization above 30% may negatively impact your credit score.

For example, let’s say you’ve got two credit cards:

• One with a $10,000 credit limit and zero balance.
• One with a $10,000 credit limit and a $4,000 balance.

In this scenario, your overall credit utilization would be 20% ($4,000 balance divided by $20,000 in total available credit) — but your credit utilization on the second card would be 40% ($4,000 balance divided by $10,000 credit line).

Paying thousands of dollars in taxes with your credit card (or multiple credit cards) may severely increase your credit utilization, depending on the amount of available credit to you. Fortunately, this is only temporary. Once you pay down your credit card balances, it won’t take long for your credit score to rebound.

In fact, if you’re able to pay off your bill as soon as the transaction posts, there will likely be no impact to your credit score. That’s because credit card issuers tend to report your balances to the credit bureaus once per month. Quickly paying down your bill can prevent the credit bureaus from knowing your balance was ever high.

When should I pay taxes with a credit card?

To earn a welcome bonus

Credit card welcome bonuses are the fastest way to amass hundreds (even thousands) of dollars in cash back or travel rewards. A big reason people don’t earn more of them is because they’re often guarded by a minimum spending requirement that can be tough to achieve.

For example, the Ink Business Preferred® Credit Card offers 100,000 bonus points after you spend $8,000 on purchases in the first three months from account opening — but the minimum spend requirement can be a major deterrent.

By directing your tax bill through the credit card, a spending requirement (or two) like this can be a cinch.

To earn credit card incentives

Some credit cards reward you for spending a certain amount of money each calendar year.

For example, The World of Hyatt Credit Card*The information for the The World of Hyatt Credit Card has been collected independently by CNN Underscored. The card details on this page have not been reviewed or provided by the card issuer. * offers a free night certificate at Category 1-4 Hyatt hotels each calendar year you spend at least $15,000. This certificate can be worth several hundred dollars, depending on which property you use it.

To earn valuable travel rewards

Remember, you’re guaranteed to be charged at least 1.85% when paying taxes with a credit card. If you can get more value than that from the rewards you earn, it could be worth it.

There are many cash-back credit cards that offer 2% back on all purchases. For example, the Citi Double Cash® Card offers 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi Travel℠ portal through 12/31/24. By using a card like this, the best return you’ll get is a paltry 0.15% (2% return minus 1.85% processing fee). That’s better than nothing.

To take advantage of a 0% intro APR

If you can’t currently pay your tax bill but you know you’ll be able to within 12 to 21 months, you may consider opening a card that offers a 0% introductory APR on purchases. You’ll still have to make the minimum payment each month, but at least every penny of your payment will go toward the principal.

The Wells Fargo Reflect® Card offers a 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers (18.24%, 24.74% or 29.99% variable APR thereafter). Balance transfers made within 120 days from account opening qualify for the introductory rate and a balance transfer fee of 5%, min $5 applies. That’s a good long while to chip away at your bill with no interest payments.

There are two caveats to this strategy:

• The credit limit you’re approved for may not be enough to cover your entire tax bill.
• If you fail to completely pay off your credit card balance before the promotional period ends, you’ll be charged high interest on the remaining balance.

If you aren’t absolutely certain you can pay off your taxes by the end of the intro APR period, don’t go this route.

*The information for the following card(s) has been collected independently by CNN Underscored Money: The World of Hyatt Credit Card*The information for the The World of Hyatt Credit Card has been collected independently by CNN Underscored. The card details on this page have not been reviewed or provided by the card issuer. , Citi Double Cash® Card. The card details on this page have not been reviewed or provided by the card issuer.