Can You Pay Taxes With a Credit Card?

Finding out that you owe a significant amount of money in taxes can be surprising news to digest. Tax season doesn't have to be stressful as long as you have a plan in place for how you will file your taxes and pay your tax bill. Money may be tight, so perhaps you're wondering if it makes sense to use a credit card to pay your taxes. Keep reading to find out if this is a good choice for you.

It's possible to pay your taxes with a credit card

Yes, it's possible to pay your federal taxes with a credit card. But should you? Be aware of extra fees you'll have to pay when you use your credit card for tax payments. Knowing how much you'll pay ahead of time can help you make a more informed decision.

No matter how you use your credit card to pay your taxes, you'll be charged a fee. If you use one of the third-party payment processors that the IRS recommends, you'll be charged fees. If you file your taxes through an online tax preparation company and make a credit card payment directly through them, you'll also be charged fees.

For either situation above, the total fee you'll pay is calculated as a percentage of the amount paid. There is also usually a minimum fee in place. Fees vary depending on the payment processor or tax preparation company you use. Be sure to look into these costs before using a credit card to pay your taxes so you can avoid unexpected charges.

There's no workaround to avoid paying credit card fees when paying your taxes with a credit card. You'll need to decide if it's worth the fees to use your card. The best way to avoid paying extra fees is to make a payment with funds directly from your bank account.

When it may make sense to pay taxes with a credit card

It may make sense to pay your taxes with a credit card. Here are some examples.

You're trying to hit a minimum spend

If you recently opened a top credit card that requires a minimum spend to earn bonus points, it may be smart to use your credit card to pay your taxes. With that being said, it's essential to consider whether the bonus points outweigh the fees that are charged. If you're going to have to pay hundreds of dollars in fees, it probably isn't a good plan.

You want to earn more points or rewards

Depending on the credit card you have and the earning potential it offers, you may decide to pay your taxes with a rewards credit card to earn additional points or rewards. Just make sure that the math makes sense. If you don't have a very high tax bill, it may be a good option.

You don't have the funds available in your bank account

Difficult times happen, and even during these situations, Uncle Sam still wants his money. If you don't have the money you owe in your bank account, you may decide to charge your card. Just figure out a plan to pay off this credit card charge as soon as possible to avoid paying credit card interest in addition to credit card processing fees. It's never a good idea to pay interest charges if you can avoid it.

The bottom line

Before rushing to pay your taxes with a credit card, make sure you consider all payment options. While it may make sense to pay credit card fees for some taxpayers, it may not be a smart idea for others. Always take a look at the pros and cons to make a more informed choice and have a plan in place to pay off your credit card statement balance.

Still have questions?

Some other questions we've answered:

• What if I can't pay my taxes?
• Should I use a personal loan to pay my taxes?
• Is credit card interest tax deductible?