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If you won’t be getting a tax refund this year, you can still possibly get something out of paying your taxes. Using credit cards for paying your taxes is a rewarding way to get a tax refund alternative with rewards points and sign-up bonuses. But, you have to use the right credit card. And the rewards have to justify the processing fee for using your travel credit card.
Again, although any credit card will pay your taxes, the rewards need to be greater than the additional processing fees you will pay. The IRS won’t collect a penny of the credit card processing fees, but the three payment processors that partner with the IRS do for debit, credit, and digital wallet transactions that cost up to 1.99% of your tax bill.
2018 Tax Return Deadline
The federal 2018 tax filing deadline is April 17, 2018. If you need to file a state tax return, that filing deadline might be the same date (or later). If you have to “pay in” this year, you can make your payments interest-free.
Making any payments after the April 17 deadline are subject to additional interest and penalties that can erase any additional rewards after you pay the processing fee. Whether you pay with your taxes by credit or not, file your return before April 17 to ensure you don’t get hit with any surprise fees.
The Best Credit Cards for Paying Taxes
While many people think that the best time to apply for a new travel credit card is when they book their summer vacation or open their wallet for holiday travel and gifts, tax time can be just as rewarding.
Before you pay your taxes with just any run-of-the-mill credit card, you need to look at two important factors:
- Purchase Rewards
- Sign-Up Bonus Value
Each point you earn must be worth at least 2 cents each ($0.02) to offset the payment processing fees. The sign-up bonus can make up the difference.
If using a credit card to pay your taxes is the difference between receiving a sign-up bonus or not–paying a 2% processing fee is well worth it to get a mountain of bonus points in return.
Chase Sapphire Preferred
Sign-Up Bonus Offer: 50,000 points ($625+ value) after spending $4,000 in three months
Annual Fee: $0 the first year then $95
The Chase Sapphire Preferred is a go-to favorite for travelers that want flexible travel rewards without a steep annual fee commanded by premium travel credit cards. Here are three main reasons beyond the $625 in travel sign-up bonus to consider the Chase Sapphire Preferred:
- 13 1:1 travel partners including United, Southwest Airlines, Hyatt, and Marriott
- 25% travel redemption bonus when booking award travel through Chase
- 2x points on all travel and dining and 1 point for everything else
By transferring your Ultimate Rewards points to your favorite frequent flyer program, you can easily make each point worth at least 2 cents each–the sweet spot to cancel out the processing fees on your tax bill.
Chase Sapphire Reserve
Sign-Up Bonus Offer: 50,000 points ($750+ value) after spending $4,000 in three months
Annual Fee: $450
Frequent flyers looking for more than 1:1 point transfers can find more value out of the Chase Sapphire Reserve.
You will enjoy the following travel benefits with the Chase Sapphire Reserve:
- $300 annual travel credit
- Global Entry application fee reimbursement
- Priority Pass Select membership
- 50% travel redemption bonus
- 13 1:1 travel partners
- 3x points on all travel and dining purchases
The additional travel benefits can easily pay the $450 annual fee if you fly on a regular basis. And you get full access to the 1:1 airline and hotel travel partners too.
Starwood Preferred Guest Credit Card from American Express
Sign-Up Bonus Offer: 30,000 points ($1,500+ value) after spending $3,000 in three months
Annual Fee: $0 the first year then $95
The Starwood Preferred Guest Credit Card from American Express is another top-notch hotel rewards card where your points are almost always worth between 2 to 3 cents each (or higher)! Rewards nights start at 2,000 points and the sign-up bonus can get you 15 free nights, plus the 5th night is free on 5+ night stays at Category 3-7 properties.
There will be some changes coming to the Amex SPG later in 2018, so this tax season can be an opportune time to apply for the card if you don’t already have it. While we don’t know the exact changes yet, we know what benefits the Amex SPG currently offers:
- 1:1 Airline Point Transfers
- 5,000 bonus points when transferring 20,000+ points at once
- Up to 5x points on Starwood purchases
- Upgraded SPG membership status
Because Starwood is merging with Marriott, you can also redeem your Starpoints for Marriott and Ritz-Carlton reward nights too. And you will enjoy complimentary Marriott Rewards membership status that mirrors your current SPG status–even if you’ve never stayed at a Marriott property before!
Sign-Up Bonus Offer: $150 after spending $500 in three months
Annual Fee: $0
The Chase Freedom is a cash back credit card that earns up to 5% on rotating bonus categories. Lucky for you, your first $1,500 in tax payments earn 5% (5 points per $1) if you pay them on or before March 31, 2018. That’s because digital wallet payments are one of the bonus categories for the 1st quarter of 2018. If you wait until April to send payment, you will only earn 1% back.
This is the best cashback card for paying your taxes because of the 5% bonus, and your points can be worth even more if you have a Chase credit card combo that lets you redeem or transfer your points for travel with the Chase Sapphire or Ink Business Preferred.
Platinum Card from American Express
Sign-Up Bonus Offer: 60,000 points ($600+ value) after spending $5,000 in three months
Annual Fee: $550
If you think the Chase Sapphire Reserve is rich with amenities, look at the Platinum Card from American Express:
- $200 air travel credit
- $200 Uber credits
- Complimentary access to four lounge networks
- Global Entry fee reimbursement
- 1:1 travel partners
- 5x points on air travel and hotel purchases
- Upgraded Hilton Honors and Starwood Preferred Guest membership status
The Amex Platinum earns Membership Rewards that can be transferred directly to Delta, Emirates, and Etihad to name a few of the 1:1 travel partners. Frequent flyers will benefit most from this premium travel rewards card.
Amex EveryDay Credit Card
Welcome Offer: 10,000 points ($100 value) after spending $1,000 in first three months
Annual Fee: $0
The Amex Everyday Credit Card is Amex’s no-fee cash rewards credit card that happens to earn Membership Rewards that you can transfer to the 1:1 Amex travel partners.
The real value of this card is the 20% point bonus on your first 20 monthly card purchases. If your tax bill is one of these purchases, imagine how many extra points you can earn.
Chase Hyatt Visa
Sign-Up Bonus Offer: 40,000 points ($1,600+ value) after spending $2,000 in three months
Annual Fee: $75
Most hotel credit cards aren’t a good deal, but the Chase Hyatt Visa and its World of Hyatt rewards program are a rare exception as your points are easily worth more than 2 cents each per stay. Rewards nights start at 5,000 points per night and if the nightly rate is $200 cash, your points are worth 4 cents each!
You will also enjoy the following Hyatt benefits to keep earning rewards nights sooner:
- Automatic Hyatt Discoverist status (10% point bonus and 2 p.m. late checkout)
- 3x points on Hyatt purchases
- 2x points at restaurants, car rental agencies, and direct airline purchases
- 1 free Hyatt anniversary night at a Category 1-4 property
Summary on Paying Your Taxes with a Rewards Credit Card
Most of us view paying taxes as going to the dentist–it’s something we do as quickly and painlessly as possible. While paying taxes is never fun, using a rewards credit card can actually help you make money by paying your taxes. That won’t happen if you pay your taxes with cash instead.
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Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airlines or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities.