Earning points and miles while paying your taxes:
It’s that time of the year again when taxpayers like me start feeling overwhelmed with the task of collecting documents like W2s and 1099s. However, as a travel hacking enthusiast, I am also looking forward to strategically planning how to make the most of this upcoming spend and earn as many points and miles as possible.
Benefits of using a credit card to pay your upcoming tax bill:
If you’re wondering why you should pay your tax bill with a credit card and what benefits it could bring, you’re not alone. One of the quickest ways to earn thousands or even millions of points and miles is by consistently working on Sign-Up-Bonuses (SUBs). These SUBs usually come with a minimum spend requirement, which can range from $3,000 to $15,000 or more.
Many people hit their SUBs by using their credit card to pay for their everyday expenses, as well as upcoming large expenses such as a tax bill. Although nobody enjoys paying taxes, you can get a very nice return on your obligation, possibly enough to even send you on a nice vacation!
Fortunately, the IRS has three approved processing companies that allow you to pay your taxes with a debit or credit card. These companies do charge processing fees, but none of them will be charged as a cash advance. Instead, they will all show up as normal purchases.
- Pay1040.com ($2.50 debit card fee, 1.87% processing fee)
- ACIPayOnline.com ($2.20 debit card fee, $1.98% processing fee)
- PayUSAtax.com ($2.14 flat fee, 1.82% processing fee)
Last year, I used Pay1040 to pay my taxes and complete my Chase Sapphire Preferred SUB. As a result, I earned over 85,000 Chase UR points. These points were enough to book a round-trip business class flight or a four-night stay at a Category 4 Hyatt hotel!
How to determine what card to use?
When it comes to paying your tax bill, choosing the right credit card depends on the amount you owe. For example, if your tax bill is $15,000, the American Express Business Platinum card can earn you a minimum of 172,500 American Express MR points through their SUB (although this may vary depending on the offer you c-have). This amount of points is enough to redeem a round-trip business class flight to destinations such as Thailand, Asia, Morrocco etc! Where else can you get such a high return on paying your bills, like taxes?
There have been rumors and DPs regarding the use of American Express credit cards to pay taxes, as they may consider it a “Cash Equivalent” that does not qualify for sign-up bonuses. However, this DP has not been confirmed, and most users have reported receiving their SUBs after paying their taxes!
Ultimately, the choice of credit card will depend on your financial circumstances and needs, as there are many options to choose from.
Always remember, the key to playing the travel hacking game is to avoid going into debt. Use your credit cards as if they were debit cards. If you need more time to pay back your tax bill, consider applying for a 0% APR credit card, such as the Chase Business Ink Cash or Unlimited (link in comment section)
Is it worth it?
It’s worth paying the fee for using your credit card to pay your taxes only if you earn more points or miles than the fee being charged. For instance, if you use a card like AMEX BBP that earns 2x per $1 up to $50,000 on all purchases annually, you’ll earn enough points to outweigh the fee, making it worth using the card.
However, if you’re not working on a SUB and your card only earns 1x per $1 on purchases, it wouldn’t make sense to use it since the fee would be more than what you’d earn.
Always evaluate your situation before deciding which card and method works best for you.
If you’re still unsure, I’m here to help. I offer free Credit Card Consultations (link to my form can be found in the comments).
If you need more personalized assistance, I also offer 1-on-1 Strategy Sessions for $150 for a 60-minute session.
