I'm Paying My Taxes With My Credit Card in 2024. Should You Do the Same?

The IRS allows you to pay your taxes with a credit card. However, you need to use a third-party service in order to do so. These services charge anywhere between 1.85% and 1.98%, depending on which one you choose. There are also minimum fees ranging from $2.50 to $2.69 that the services charge in case you're paying a small tax bill.

If you owe money to the IRS, you'll have to decide whether to pay out of your checking account or whether to use a credit card. Despite the added fees, I use my card every year. But there are a few key things to consider in order to decide whether it makes sense for you to do the same.

Here's why I use my credit card to pay my taxes

I use my credit card to pay my taxes for a simple reason. The value of the rewards from my credit card company are higher than the cost of the fees I have to pay for using my card. As a result, I end up better off financially by earning those rewards, even though I had to pay a fee in order to get them.

My credit card gives me 2.62% back on most purchases because I earn a rewards boost by being a preferred customer (which basically means I have a lot of money in a brokerage account affiliated with the card issuer). Since I can pay a fee of 1.85% and get 2.62% back, it's worth using the card to get the rewards.

Say, for example, I end up paying a $10,000 tax bill. The value of the rewards I end up with, after subtracting the added fees associated with paying with a card, is $77. That's a pretty good amount of money. Why would I want to pass that up?

Should you use a card or pay out of your bank account?

If you have a card offering you 2% back or more in rewards and merchandise, then it could be worth charging your taxes on a credit card to get the rewards left over after paying the fee.

There's no real downside since you can do this quickly and easily, and you may as well earn rewards for something you have to pay anyway. The upside depends just how big your tax bill is and what your card's reward rate is.

You may also want to charge your taxes if doing so can help you to meet a spending requirement that opens up the door to a new cardmember sign-up bonus. Say, for example, you sign up for a card that gives you a $500 bonus cash back reward after you spend $3,000 in the first three months of opening the card. If you can use the card to pay your taxes, that will make it a lot easier to spend the required $3,000 and earn your $500 bonus.

If you aren't in line for a new cardmember bonus, though, and your card offers only limited rewards -- like 1% or 1.5% cash back -- or no rewards at all, then paying the added fee to charge your taxes just doesn't make sense. Just pay out of your bank account rather than paying an extra 1.85% or more.

And, no matter what, you'll definitely want to pay off the taxes you charge on your card before your credit card interest charges kick in. The interest you'd pay would cost far more than rewards you earn, and there's no sense in making your taxes cost even more than necessary!