Tax season is in full swing. As you file your return, you may consider paying your taxes by credit card. After all, doing so can earn you travel rewards or cash back on your taxes.
Paying taxes with a credit card may not be the best idea for everyone, so you'll first want to determine whether it's a good choice for your situation. Once you've decided paying by credit card is right for you, don't just reach for your rewards credit card that only awards 1 point per dollar or 1% cash back on your purchases. Instead, consider how you can maximize your potential credit card rewards.
Below, CNBC Select goes over some of the best ways to boost your credit card rewards when paying your taxes and explains how you can stack deals for buying tax preparation software to save money and earn rewards.
What we'll cover
How to pay your taxes with a credit card
There are three IRS-approved third-party payment processors for credit card payments. All the processors accept cards from the major credit card networks, including Visa, Mastercard, Discover® and American Express. Each payment processing company charges different fees.
These are the three payment processors and their fees:
- PayUSAtax.com: 1.82% (minimum $2.69)
- Pay1040.com: 1.87% (minimum $2.50)
- ACI Payments, Inc.: 1.98% (minimum $2.50)
Keep in mind that if you pay your business taxes with a credit card, the card processing fees are also tax deductible. However, individuals cannot deduct the fees from their personal tax return.
Open a new travel credit card with a welcome bonus
Having a planned large expense (like a big tax payment) is a great time to apply for a new credit card since most welcome offers require you to spend several thousand dollars to earn the bonus. Many travel rewards credit cards have big sign-up bonuses that can earn you enough points or miles to redeem for an almost-free vacation.
Some top travel rewards cards with the largest welcome offers include the Capital One Venture Rewards Credit Card, Chase Sapphire Preferred® Card and The Platinum Card® from American Express. Depending on how you redeem your rewards, you can potentially earn over $1,000 in value from these bonuses if you meet the requirements.
Capital One Venture Rewards Credit Card
Rewards
5 Miles per dollar on hotel and rental cars booked through Capital One Travel, 2X miles per dollar on every other purchase
Welcome bonus
Earn 75,000 bonus miles once you spend $4,000 on purchases within 3 months from account opening
Annual fee
$95
Intro APR
N/A for purchases and balance transfers
Regular APR
19.99% - 29.99% variable
Balance transfer fee
$0 at the Transfer APR, 4% of the amount of each transferred balance that posts to your account at a promotional APR that Capital One may offer to you
Foreign transaction fee
None
Credit needed
Excellent/Good
See rates and fees, terms apply.
Chase Sapphire Preferred® Card
Rewards
Enjoy benefits such as 5x on travel purchased through Chase Ultimate Rewards®, 3x on dining, select streaming services and online groceries, 2x on all other travel purchases, 1x on all other purchases, and $50 annual Ultimate Rewards Hotel Credit, plus more.
Welcome bonus
Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 when you redeem through Chase Ultimate Rewards®.
Annual fee
$95
Intro APR
None
Regular APR
21.49% - 28.49% variable on purchases and balance transfers
Balance transfer fee
Either $5 or 5% of the amount of each transfer, whichever is greater
Foreign transaction fee
None
Credit needed
Excellent/Good
Terms apply.
Read our Chase Sapphire Preferred® Card review.
The Platinum Card® from American Express
Rewards
Earn 5X Membership Rewards® Points for flights booked directly with airlines or with American Express Travel up to $500,000 on these purchases per calendar year, 5X Membership Rewards® Points on prepaid hotels booked with American Express Travel, 1X points on all other eligible purchases
Welcome bonus
Earn 80,000 Membership Rewards® Points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership. Apply and select your preferred metal Card design: classic Platinum Card®, Platinum x Kehinde Wiley, or Platinum x Julie Mehretu.
Annual fee
$695
Intro APR
None
Regular APR
See Pay Over Time APR
Balance transfer fee
N/A
Foreign transaction fee
None
Credit Needed
Excellent/Good
See rates and fees, terms apply.