While it is possible to pay your taxes with a credit card, according to the IRS, that doesn’t necessarily mean you should. There are benefits and risks associated with using your credit card to pay your income tax bill.
Can You Pay Taxes with a Credit Card?
Last Updated: June 18, 2024
5 min read
Key points about: paying your taxes with a credit card
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It's possible to pay your taxes with a credit card, but there are risks as well as benefits associated with this.
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Paying with a credit card can help you avoid late fees from the IRS if you don’t have enough money to pay your taxes on time.
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Paying your taxes with a credit card requires you to pay a processing fee. Processing fees vary depending on the payment processor you use.
Using your credit card to pay taxes can help you avoid IRS late payment penalties or earn cash back rewards on your credit card. However, if you fail to pay your credit card balance on time and in full every month, you can quickly rack up fees and interest charges. Discover® offers no late fee on your first late payment,1 but not all credit card issuers do. Plus, you would still owe interest on your balance.
It’s a good idea to consult tax professionals before paying your taxes with a credit card. But here are some basics to consider when weighing the potential benefits and risks.
What types of taxes can you pay with a credit card?
You can use your credit card to pay your federal income tax and, in some states, your state income tax. It’s even possible to pay property tax with a credit card in certain places. Check with your state, city, or county to see what taxes you’re eligible to pay using a credit card.
Keep in mind that the IRS states it limits the number of times you can pay with a credit card each tax year. In many instances, you can only use your credit card to make a tax payment twice a year, but the number varies based on the type of tax.
Benefits of using a credit card for a tax payment
Making a tax payment with a credit card may offer several benefits, provided you can responsibly manage your credit card balance.
You can avoid late payment penalties from the IRS if you pay your taxes on time
If you don’t have the funds to pay your total tax bill, you can use your credit card to ensure you pay on time and avoid late payment penalties.
You could earn cash back rewards on your credit card purchases
Using your credit card to help with a tax payment may let you earn cash back rewards. Before paying for taxes with your credit card, you may want to determine whether the overall rewards you’ll get using your rewards credit card are higher than the processing fees you'll pay if you charge your taxes to a credit card.
Did you know?
Using a new credit card may offer extra credit card rewards to cardmembers. With Discover Cashback Match, you get an unlimited dollar-for-dollar match of all the cash back you earn at the end of your first year, automatically. There is no limit to how much we’ll match.2
You can manage your cash flow by paying your taxes over time
Using a credit card to pay your income taxes can also help you manage your cash flow. Instead of paying a lump sum of cash at once, you can spread your payments out and budget for other expenses in addition to your tax bill.
Risks of using a credit card for tax payments
While paying your taxes with a credit card can be a convenient way to meet your tax obligations, it also carries some risks.
You’ll pay processing fees
The IRS explains that when you pay your federal tax bill with a credit card, you’ll need to use one of three payment processors: ACI Payment, Inc., Pay1040, or payUSAtax. Each charges a processing or convenience fee based on your payment type. Even paying with a debit card requires a fee. However, debit card fees are typically flat and lower than fees associated with credit card payments.
You may accrue interest for the unpaid balance
If you pay your taxes with a credit card and then fail to pay off your purchase balance by the due date each month, you may accrue interest charges.
Your credit score may drop due to high credit usage
Using a large amount of your available credit to pay off your taxes could negatively impact your credit score and make you less attractive to lenders.
Your credit utilization ratio represents how much of your total available credit (loans, credit cards, etc.) is in use and accounts for 30% of your credit score. To maintain a strong credit score, it’s important to keep your credit utilization ratio low. If your tax bill accounts for a large portion of your credit limit, using your credit card to pay may hurt your credit score, especially if you can’t repay your balance in full at the end of the billing period.
You may be able to minimize damage to your credit score if you have substantial available credit or could repay your balance quickly after paying your taxes.
Weighing your tax payment options
So, considering all the factors, what's the best way to pay your taxes? If using credit is the only way to pay your taxes on time, a rewards credit card may be the best resource. However, if you can pay on time using the cash in your bank account, you may want to go that route to avoid processing fees and potential interest.
Whether paying your income tax, property tax, or other, weighing the pros and cons of using credit can help you decide if a credit card is the best payment option for your unique situation.
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Cashback Match: We’ll match all the cash back you’ve earned on your credit card from the day your new account is approved through your first 12 consecutive billing periods or 365 days, whichever is longer, and add it to your rewards account within two billing periods. You earn cash back only when they’re processed, which may be after the transaction date. We will not match: rewards that are processed after your match period ends; statement credits; rewards transfers from Discover checking or other deposit accounts; or rewards for accounts that are closed. This offer may not be available in the future and is exclusively for new cardmembers. No purchase minimums.
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