Best Credit Cards to Use to Pay Your Taxes in 2021
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Whether you prepare and file your income taxes with a professional CPA or use a DIY-friendly online tax program like H&R Block to save on prep fees, the end result should be about the same. You’ll either qualify for a refund or have an outstanding liability that needs to be settled if you want to stay on the government’s good side.
If you find yourself in the latter camp, as millions of Americans do every year, you’ll have another choice to make: how to settle up with the IRS and your state tax authorities.
Most taxpayers either choose to have these payments debited electronically from a bank account or cut checks to cover the balance. But some chart a different course: plastic.
Yes, these creative souls use credit cards to pay their taxes.
Paying taxes with a credit card isn’t always ideal. It requires a credit card with a high enough limit to cover the full balance owed. It invariably involves processing fees (convenience fees) in the neighborhood of 1.5% to 2% of the transaction amount. And, for taxpayers without the means to pay off their balances before the interest rate kicks in, it can be a costly proposition.
But paying taxes with a credit card does make sense for certain taxpayers, especially those who’ve recently signed up for new cards with long 0% APR introductory promotions or generous sign-up bonuses (also known as new cardmember offers, welcome bonuses, or first year bonuses). If you’re among them — or hope to be soon — you need to know which cards to choose and which to avoid.
Best Credit Cards to Pay Your Taxes
When it comes to covering your tax liabilities and paying the IRS, some credit cards — and credit card issuers — are better than others. What follows is an overview of the top cards to pay your end-of-year and quarterly estimated taxes, segmented into four categories: cash back, travel, low APR, and small business. Bear in mind that most of these cards require a good credit score — and, in some cases, excellent credit.
Best Cash-Back Credit Cards for Tax Payments
The most taxpayer-friendly cash-back cards have outsize sign-up bonuses and offer relatively high ongoing returns on spending — including on state and federal taxes — via generous cash rewards programs:
- Chase Freedom Unlimited®. Chase Freedom Unlimited® earns unlimited 1.5% cash back on all purchases, and its sign-up bonus is above-average too. Plus, the 0% introductory purchase APR lasts 15 months after account opening — plenty of time to let those tax payments float. After the introductory period ends, the regular APR ranges from 14.99% to 23.74%. There’s no annual fee to eat into your cash-back earnings here. Read our Chase Freedom Unlimited review for more information.
- Blue Cash Preferred® Card from American Express. The Blue Cash Preferred® Card from American Express is worth the $95 annual fee, thanks to a super-generous 6% cash-back rate on supermarket purchases (up to $6,000 in total qualifying purchases per year) and select streaming services (unlimited), and unlimited 3% cash back on purchases at gas stations and select U.S. transit operators, including rideshare operators such as Uber and Lyft. It has a nice welcome bonus too: a $250 statement credit after you spend at least $1,000 in eligible purchases within three months of opening your account. Read our Blue Cash Preferred from American Express review for more information.
- Citi® Double Cash Card. The Citi® Double Cash Card earns 1% cash back on all eligible purchases and 1% cash back on all balance payments in statement cycles where at least the minimum balance due is paid. That adds up to 2% cash back when you pay your balance in full by your statement due date. And there’s no annual fee. Read our Citi® Double Cash Card review for more information.
Check out our guide to the best cash-back credit cards for more ideas.
Best Travel Credit Cards for Tax Payments
Like their cash-back counterparts, the best travel credit cards for tax payments have big sign-up bonuses and generous ongoing rewards programs:
- Chase Sapphire Preferred® Card. The Chase Sapphire Preferred® Card is a premium travel credit card that earns unlimited 2 points per $1 spent on qualifying dining and travel purchases, and 1 point per $1 spent on all other purchases. The sign-up bonus is the main attraction for taxpayers: 80,000 bonus points, worth up to $1,000 when redeemed for travel purchases through the Chase Ultimate Rewards travel portal or statement credits against eligible prior purchases, when you spend $4,000 in qualifying purchases within three months. The $95 annual fee is easy to offset when you use Sapphire Preferred as your primary credit card. Read our Chase Sapphire Preferred® Card review for more information.
- Chase Sapphire Reserve® Card. The Chase Sapphire Reserve® Card is Sapphire Preferred’s more generous cousin. Its sign-up bonus is worth $750 when redeemed for travel and eligible statement credits and requires $4,000 in qualifying purchases within the first three months. Moving forward, it earns unlimited 3 points per $1 spent on eligible travel and dining purchases. A slew of value-added perks justify the high annual fee: among them, a $300 annual travel credit and complimentary access to more than 1,000 airport lounges worldwide. Read our Chase Sapphire Reserve® Card review for more information.
- Capital One Venture® Rewards Credit Card. The Capital One Venture® Rewards Credit Card has an early spend bonus worth up to $500 when redeemed on travel. To earn it, spend at least $3,000 in eligible purchases within the first three months of card membership. Moving forward, you’ll earn double miles — 2 miles per $1 spent — on all eligible purchases. The $95 annual fee is easy to offset with moderate to heavy spending. Read our Capital One Venture® Rewards Credit Card review for more.
- The Platinum® Card from American Express. This premium Amex product, popularly known as The Platinum® Card, has an excellent welcome offer with a manageable spending threshold. Its ongoing rewards program isn’t half bad either, and it boasts an array of luxury perks to satisfy frequent travelers long after their taxes are paid. Read our review of The Platinum Card from American Express for more details.
Check out our guide to the best travel rewards credit cards for more ideas.
Best Low-APR Interest Credit Cards for Tax Payments
Low-APR credit cards aren’t known for attractive rewards programs or luxurious value-added perks. They stand out with long 0% APR introductory promotions and regular APRs low enough to make short- and medium-term financing bearable. And all three of these cards have no annual fee:
- Citi® Simplicity® and Citi® Diamond Preferred®. Citi® Simplicity® and Citi® Diamond Preferred® are closely related cards renowned for super-long 0% APR introductory periods on balance transfers and purchases. After these promotional periods end, variable APR applies. Needless to say, that’s music to taxpayers’ ears. Take your pick. Read our Citi® Simplicity® review and Citi® Diamond Preferred® review for more information.
- PenFed Promise Visa® Card. PenFed Promise Visa® Card is one of the few low-APR credit cards with a legitimate sign-up bonus: a $100 statement credit when you spend at least $1,500 in qualifying purchases within 90 days. The biggest drawback — the lack of an introductory APR promotion on purchases — is partly made up for by an exceptionally low regular APR: 9.49% to 17.99% APR on purchases, including tax payments, depending on prevailing rates and your personal creditworthiness. Read our PenFedPromise Visa Card review for more information.
Check out our guide to the best low-APR interest credit cards for more ideas.
Best Small-Business Credit Cards for Tax Payments
These taxpayer-friendly small-business credit cards have fantastic sign-up bonuses or introductory APR promotions and attractive ongoing rewards:
- Chase Ink Business Preferred® Credit Card. The Chase Ink Business Preferred® Credit Card is a premium business credit card with a $95 annual fee. For taxpayers, the sign-up bonus is the main event here: 100,000 bonus points, worth up to $1,250 when redeemed for travel, on $15,000 in qualifying purchases within three months of account opening. Apply just before paying your end-of-year and April estimated taxes for maximum effect. Moving forward, Ink Business Preferred earns 3 points per $1 spent on qualifying travel, shipping, digital advertising, and telecom purchases up to the first $150,000 in annual spending across all categories. All other qualifying purchases, including tax payments, earn unlimited 1 point per $1 spent. Points are generally worth $0.01 or less at redemption, but command a value of $0.0125 when redeemed for travel. Read our Chase Ink Business Preferred Card review for more information.
- American Express Blue Business Cash™ Card. The American Express Blue Business Cash™ Card (see rates and fees) has one of the best 0% APR introductory promotions of any business credit card on the market: 0% APR on purchases for 12 months from account opening, then 13.24%, 16.24%, or 19.24% variable, depending on your creditworthiness. Plus, it earns 2% back on the first $50,000 in purchases each year, including tax payments. And there’s no annual fee. For more, read our American Express Blue Business Cash Card review.
Check out our guide to the best small-business credit cards for more ideas. And if you need help determining the most advantageous legal structure for your business, review our guide to choosing the right legal business entity.
Settling your tax bill isn’t the only way to take advantage of a 0% APR promotion or new cardholder offer. It’s not even the best. Other major purchases, like materials for a major home improvement project or tickets for a long-delayed vacation, will probably add more value to your life in the long run than sending yet another pile of dough to the tax collector.
But paying your taxes with a credit card can pay off big time this tax season — with a clear plan to avoid unnecessary interest charges and the right card for the job, that is. Hopefully you’ve found that card on this list.
For rates and fees of the American Express Blue Business Cash™ Card, see this page.
Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Published at Thu, 21 Jan 2021 18:12:15 +0000