How to Earn Points and Miles by Paying Taxes

While most of us don’t like paying taxes, the silver lining is that paying taxes through credit cards that earn rewards—in the form of cash back, points or miles—can be profitable compared to paying taxes from bank accounts using checks or electronic payments. Despite the processing fees associated with paying taxes with credit cards, the value of the rewards earned often exceeds the fees. Tax Payment Basics Before getting into the details of earning points and miles by paying taxes with credit cards, let’s review some basics about paying taxes, specifically individual (personal), federal income taxes. The post How to Earn Points and Miles by Paying Taxes appeared first on MileValue.

Mar 12, 2025 - 11:17
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How to Earn Points and Miles by Paying Taxes

While most of us don’t like paying taxes, the silver lining is that paying taxes through credit cards that earn rewards—in the form of cash back, points or miles—can be profitable compared to paying taxes from bank accounts using checks or electronic payments. Despite the processing fees associated with paying taxes with credit cards, the value of the rewards earned often exceeds the fees.

Tax Payment Basics

Before getting into the details of earning points and miles by paying taxes with credit cards, let’s review some basics about paying taxes, specifically individual (personal), federal income taxes. To be clear:

  • Individual taxes are associated with Internal Revenue Service (IRS) Form 1040 series, but individual returns may include some business income, such as self-employment income reported on Schedule C.
  • State and local income taxes and property taxes sometimes can be paid with credit cards, but those options vary widely by jurisdiction and aren’t discussed here.
  • We’re not tax professionals and aren’t providing tax advice.

Annual Taxes

Most of us are familiar with the annual income tax cycle. Generally, the tax year is January to December, and federal income tax returns must be filed by April 15 (or the next business day if it falls on a weekend) of the following year. For tax year 2024, income tax returns and payments are due by April 15, 2025.

Estimated Taxes

Some taxpayers pay quarterly estimated taxes during the year. Estimated tax payments are required in situations where taxes aren’t being withheld at all or if amounts withheld aren’t sufficient. Many freelancers, independent contractors and other self-employed individuals don’t have taxes withheld like regular (W-2) employees do, so these individuals need to pay quarterly estimated taxes. Individuals with investment income or retirement income also may make estimated tax payments.

The IRS divides the year into four quarters for estimated tax purposes, but these quarters don’t align with regular calendar quarters and have unequal length. The four IRS quarters and due dates—as with annual taxes, if the 15th isn’t a business day, payments are due on the next business day—for estimated tax payments are:

  • Quarter 1 covers income from Jan. 1 to March 31, with taxes due on April 15.
  • Quarter 2 covers income from April 1 to May 31, with taxes due by June 15.
  • Quarter 3 covers income from June 1 to Aug. 31, with taxes due by Sept. 15.
  • Quarter 4 covers income from Sept. 1 to Dec. 31, with taxes due by Jan. 15.

Companies that accept credit and debit card tax payments provide a choice of making current year or estimated tax payments, and estimated tax payments are automatically assigned to a quarter based on the payment date. A few key points about estimated tax payments follow.

  • Quarters don’t really matter if you pay estimated taxes by each due date and don’t backload payments at the end of the year.
  • The IRS is fine with taxpayers frontloading estimated tax payments earlier in the year. 
  • While Form 1040-ES is associated with estimated tax payments, if you’re paying estimated taxes with a credit card, you don’t have to submit a form.

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Cost of Paying Taxes with Credit and Debit Cards

There were significant changes in early January 2025 with the processing companies and fees for paying taxes with credit and debit cards. At the time of writing, there were some inconsistencies in what was communicated about the fees and what was charged, so it’s important to keep on top of this if you’re interested in making tax payments with credit cards.

For several years before 2025, three companies processed federal tax payments, and as of the end of 2024, the companies and fees were:

  • PayUSAtax.com credit card fee: 1.82% (minimum $2.69)
  • Pay1040.com credit card fee: 1.87% (minimum $2.50)
  • ACI Payments, Inc. credit card fee: 1.98% fee (minimum $2.50)

During January 2025, PayUSAtax was removed from the IRS website with credit and debit card payment information, and fees for the other two companies were updated, as shown below.

Fees by processor
Fees by Processor

While the reduced fees initially seemed to be a positive development, changes also introduced a distinction between fees for using a “credit card” and a “commercial credit or debit card” on Pay1040’s site and “corporate credit or debit cards” on ACI Payments’ site. The IRS website showed higher fees for commercial and corporate credit cards.

In some cases, tax processing fees may be tax deductible. The IRS page with the fee information states “Card processing fees are tax deductible for business taxes.” Details aren’t provided about whether “business taxes” include taxes on business income reported on IRS Form 1040 Schedule C or for business tax forms (such as the 940 series) only.

Pay1040 Credit Card Payments

After clicking through from the IRS link to Pay1040’s website and selecting the option for personal taxes, Pay1040 noted the following:

“The convenience fee for this service is $2.15 for consumer/personal debit cards, or 2.89% of the tax payment amount for credit cards and PayPal (minimum of $2.50). Corporate credit cards and debit cards have a convenience fee of 2.89% ($2.50 minimum) and cash payments have a convenience fee of $1.50.”

This language is different compared to the IRS page—which notes a 1.75% fee if “paying by credit card” and 2.89% for “paying by commercial credit or debit card”—and doesn’t always reflect the fees that are being charged.

We reviewed other points and miles forums and blogs where this change was being discussed and tested some credit cards to see what the actual processing fees were. There were differences depending on the type of card.

  • Business or consumer American Express cards showed a 2.89% fee. We tested a Hilton co-branded consumer card and The Blue Business® Plus Credit Card from American Express.
  • Business Mastercard and Visa cards showed a 2.89% fee. We tested the Citi® / AAdvantage Business™ World Elite Mastercard® and the Chase Ink Business Unlimited® Card.
  • Consumer Mastercard and Visa cards showed a 1.75% fee. We tested the Chase Freedom Flex® and the Capital One Venture X Rewards Credit Card.

ACI Payments Credit Card Payments

The credit card processing fee decreased from 2024, but the negative development is that entering a business card for personal tax payments resulted in an error with many—but not all—business cards.

Results with the cards we tested are:

  • Multiple American Express, Mastercard and Visa consumer cards showed a 1.85% fee.
  • The American Express Blue Business Plus card showed a 1.85% fee.
  • Mastercard and Visa business cards produced an error message—and others reported the same result with American Express business cards—as shown below.
payment options

Debit Card Payments

Debit cards are rarely useful for earning rewards, but a few bank-issued debit cards do earn rewards. One example is the debit card associated with the Discover Cashback Debit account. Using this debit card earns 1% cash back on up to $3,000 in debit card purchases each month. With significantly lower flat fees for paying taxes with debit cards, using this card could be profitable.

Prepaid Mastercard and Visa debit cards (also known as gift cards) can be purchased with credit cards at office supply stores, grocery stores and other retailers and often earn category bonuses. For example, the Chase Ink Business Cash® Credit Card earns 5X Ultimate Rewards points at office supply stores. Combined with lower debit card processing fees, paying taxes with prepaid cards makes sense in some cases.

On the other hand, using prepaid debit cards to pay taxes has become increasingly difficult in recent years for two primary reasons:

  • Many prepaid debit cards don’t work on the tax processor sites, and things seem to change constantly regarding which cards work and which ones don’t. If you’re considering buying a prepaid debit card to use for tax payments, it’s useful to check recent data points on sites where points and miles enthusiasts discuss their experiences.
  • Each prepaid debit card is considered a separate payment, and the number of credit and debit card payments per tax type and individual is limited. Although IRS notes the limit as being two Form 1040 current year tax payments per year and two Form 1040-ES payments per quarter, the limit is enforced per payment processor, and taxpayers filing as married filing jointly (MFJ) can make two payments per person, per payment processor and per tax type. Nevertheless, it won’t be possible for some taxpayers with large tax bills to pay the entire amount with prepaid debit cards.

If you’re paying taxes with a prepaid debit card, it’s important to make sure that the combined total of the tax payment and processing fee are less than or equal to the card balance. For example, if using a $500 debit card through a processor that charges a fee of $2.10, the maximum tax payment amount is $497.90.

Earn Points and Miles by Paying Taxes

Benefits of Paying Taxes with Credit Cards

Because taxes often are a big expense, paying with the right credit card can generate significant rewards. To make an informed decision, you should compare the value of the rewards earned to the processing fees.

Circumstances where it can be beneficial to pay taxes with credit cards include:

  • Meeting spending requirements for a credit card welcome bonus
  • Meeting a spending threshold that provides additional benefits
  • Profitably earning cash back, points or miles

Credit Card Welcome Bonuses

Paying taxes with a credit card to partially or fully meet a new card welcome bonus usually provides the best return. That’s because many welcome bonuses represent a much higher earning rate compared to ongoing credit card spending.

Let’s consider an example for a card with a bonus of 60,000 points or $600 cash back after spending $4,000. The welcome bonus earning rate is 15X (assuming points are worth 1 cent each, calculated as 60,000 / 4,000) or 15%. If you pay $4,000 in taxes with processing fees between 1.75% and 2.95%, the net return exceeds 12% with a fee under 3% and exceeds 13% with a fee under 2%.

Spending Threshold Rewards

Beyond new card welcome bonuses and regular earning on spending, many credit cards offer additional benefits for meeting spending thresholds. Most of these rewards are based on annual spending—over a calendar year, membership year or program year—but some are cumulative, and others are transaction-based.

Certain rewards can be difficult to quantify—especially those related to elite status—since the value is highly dependent on individual travel patterns, travel volume and style. 

For example, someone travelling with family members might place a high value on free checked bags on flights and free breakfast at upscale hotels for multiple people. In contrast, these benefits might not be important for a solo business traveler who rarely checks luggage and is reimbursed for meals. It’s important to evaluate how valuable a benefit may be given your personal situation.

Cards Earning Extra Points or Miles for Total Spending or Large Transactions

The Business Platinum Card® from American Express (see rates and fees) earns 1.5X points per dollar on individual transactions over $5,000.

There also might be limited-time targeted offers to earn bonuses for spending a certain amount on specific cards. Offers can be available through your account (e.g., Amex offers, Chase offers) or as part of a retention offer made to cardholders after contacting issuers about cards they’re considering cancelling or downgrading.

The spending offer below is for the Amex Blue Business Plus Card (see rates and fees) that normally earns 2X Membership Rewards points per dollar spent, on up to $50,000. With this offer, every $2,500 spent up to a total of $7,500 would earn an additional point per dollar, resulting in total earning of 3X points per dollar.

membership rewards

Co-Branded Airline Cards to Facilitate Earning Elite Status

There are several credit cards that provide shortcuts to reaching airline program elite status or earn spending-based qualifying points. Details vary by airline program and card issuer, with options available for Air Canada Aeroplan (Chase), American Airlines AAdvantage (Barclays and Citi), Delta SkyMiles (American Express), JetBlue TrueBlue (Barclays) and Virgin Atlantic Flying Club (Bank of America).

Co-Branded Airline Cards to Earn Companion Passes or Certificates

Companion passes or certificates allow a second individual (or sometimes more people) to travel with the individual who has the pass or certificate for free or a discounted price. Details vary by program and card issuer, with options available for Alaska Airlines Mileage Plan (Bank of America), American Airlines AAdvantage (Barclays and Citi) and Southwest Airlines Rapid Rewards (Chase).

The Southwest Companion Pass is popular because it allows the companion pass holder to buy one ticket and get one (almost) free on Southwest Airlines flights purchased with cash or Rapid Rewards points. Earning the companion pass requires earning 135,000 points in a year, and the pass is valid the rest of the year it was earned plus the following calendar year. Southwest credit cards welcome bonuses and spending earn points that count toward the companion pass total, so paying taxes with Southwest credit cards can help cardholders meet the companion pass requirements.

Co-Branded Hotel Cards to Facilitate Earning Elite Status

Hotel loyalty programs have qualifying criteria for elite status that often include a certain number of nights per year. Some co-branded hotel cards have ways to earn elite status outright through spending and/or to earn elite qualifying nights. Details vary by program and card issuer, with options available for Hilton Honors (American Express), World of Hyatt (Chase), IHG One Rewards (Chase) and Marriott Bonvoy (American Express and Chase).

Co-Branded Hotel Cards to Earn Free Night Awards

Several hotel loyalty programs also allow members to earn free night awards through spending on co-branded credit cards. Details vary by program and card issuer, with options available for Hilton Honors (American Express), World of Hyatt (Chase), IHG One Rewards (Chase) and Marriott Bonvoy (American Express and Chase).

For example, the World of Hyatt Credit Card allows cardholders to earn a Category 1-4 free night certificate after spending $15,000 in a calendar year. This benefit stacks with the card’s ability to earn elite qualifying nights through spending (every $5,000 in spending earns two qualifying nights). Spending at least $15,000 in a year would earn six qualifying nights and the free night award.

Credit Card Rewards Exceed Fees

Deciding if it’s worthwhile to incur processing fees to pay taxes with a credit card is pretty straightforward for cashback cards. You compare the fee percentage to the cashback earning rate. 

  • For cards where processing fees are 1.75% or 1.85%, earning 2% cash back is above the breakeven point.
  • For cards where processing fees are 2.89% or 2.95%, a 3% cashback card is needed to achieve a small profit.

For credit cards that earn points or miles, there are two ways to evaluate tax processing fees. Some people view this like buying points or miles at a low cost, while others convert point value to a rate that can be compared to processing fees or to cashback percentages. Regardless, it’s subjective and based on individual thoughts about the value of points and miles.

Let’s look at an example from the perspective of buying points and assume that the credit card earns 1.5X points, the tax payment is $1,000 and processing fees are 1.75%.

  • Total taxes and fees: $1,000 + $17.50 = $1,017.50
  • Points earned (on taxes and fees): 1,017.5 x 1.5 = 1,526.25
  • Cost per point (using the fee amount as the cost and total points earned): $17.50 / 1,526.25 = 1.15 cents per point.
  • Decision point: If you think the points are worth more than 1.15 cents each, it makes sense mathematically to pay taxes with a credit card in this situation.

Steps to compare points value to processing fees are:

  • Determine the value of one point (or mile) in the card’s currency. Value varies depending on the currency earned and each individual’s judgement.
  • Multiply the number of points earned per dollar spent and the value of each point. This step applies if the card earns multiple points per dollar spent.
  • Compare total value to the tax processing fee.
  • Decide whether to pay with a credit card based on the difference between the value of points earned and the fee.

The following example is for a card that earns 2 flexible points on all spending. The way you redeem points is relevant to determining the value of each point. With the Capital One Venture X Rewards Credit Card, if you use rewards to reimburse purchases on your card or book travel through Capital One Travel, the redemption value is 1 cent each. 

Alternatively, if you transfer flexible currency to airline or hotel partners and then use program-specific miles and points to book flights or hotels, it’s reasonable to assume a higher value for flexible currency points. Many points and miles experts use a value of 1.5 to 2 cents each.

Let’s look at an example to quantify this.

  • Cardholder 1 primarily uses Capital One Miles to book travel through Capital One Travel at a fixed rate of 1 cent each, so the value is 1X = 1%. Since the card earns 2X points per dollar on all purchases, the individual would earn 2%. The difference between the earning rate of 2% and the tax processing fees of 1.75% or 1.85%—the current fee for a consumer Visa card—is 0.25% or 0.15%. In other words, if you make a $1,000 tax payment with a credit card that incurs a 1.75% or 1.85% fee, the total fee would be $17.50 or $18.50, and the net return would be calculated as $20 – $17.50 or $18.50 = $2.50 or $1.50.
  • Cardholder 2 primarily uses Capital One Miles to transfer to airlines and redeem for award flights. As an experienced points and miles hobby participant, this individual seeks a minimum value of 1.5 cents each when redeeming airline program miles. In this case, the return for paying taxes with a credit card is 2 points x 1.5 cents per point = 3 cents = 3%. Assuming the same 1.75% or 1.85% processing fee, the net return is the difference: 3% – 1.75% = 1.25% or 3% – 1.85% = 1.15%. For the same $1,000 tax payment, this cardholder would earn points valued at $30, which is equivalent to $12.50 or $11.50 net return.
 travel rewards earned from tax payments

Recommended Cards and Strategy

Recommendations for specific cards focus on the scenario of paying taxes with a credit card without welcome bonuses or spending thresholds. In this situation, you need to use credit cards with high enough earning rates to offset credit card processing fees. Pure cashback cards are listed separately from cards that earn flexible currency that can be transferred to airline and hotel programs.

We’ll also discuss some other techniques to get even more value when paying taxes with credit cards. These approaches include splitting payments among cards and using credit cards through PayPal.

Cards Earning Cash Back

The minimum threshold for paying taxes with credit cards should be 2% cash back when paying a fee of 1.75% or 1.85% or 3% cash back if paying a fee of 2.89% or 2.95%. Since tax payments usually aren’t eligible for category bonuses, most recommended cards earn 2% to 4% cash back on all purchases. With some cards, earning the highest cashback rates requires having a relationship with the bank, which often entails having other accounts and meeting balance requirements.

There are other cards that offer between 2% and 3% cash back on all purchases that aren’t discussed below because these cards: 

  • Aren’t currently available (for example, the Robinhood Gold Card
  • Offer 3% cash back for a limited time (for example, the Discover it Miles card earns 1.5% normally but doubles it for the first year)
  • Have other caveats for earning cash back at the noted rate.

U.S. Bank Smartly™ Visa Signature® Card

This card—which was introduced in 2024—has the same earning rate on all purchases, but the rate is dependent on combined balances you have in eligible banking and investment accounts with U.S. Bank. If you don’t have a banking relationship, the credit card earns 2 points per dollar, which is equivalent to 2% cash back, since the points can’t be transferred to partners or redeemed for more than 1 cent each. The credit card earning rate increases for cardholders with a U.S. Bank Smartly® Savings account and qualifying combined balances as follows:

  • 2.5% for $5,000 to $49,999.99 balances
  • 3% for $50,000 to $99,999.99 balances
  • 4% for $100,000 and above balances

Bank of America® Unlimited Cash Rewards

Although this card normally earns 1.5% cash back, Bank of America Preferred Rewards relationship bonuses at the following levels push the credit card earning rate over 2%:

  • Platinum tier requires $50,000 to $99,999.99 in combined balances and provides a 50% bonus resulting in a 2.25% cashback rate.
  • Platinum Honors tier requires over $100,000 in combined balances and provides a 75% bonus resulting in a 2.625% cashback rate.

Comparing the Smartly card to this card, the Smartly card offers better earning rates for the same balance requirements.

PayPal Cashback Mastercard

This card is a good option if you pay federal taxes through PayPal. PayPal is a payment option with current tax processors, as discussed below. The $0 annual fee PayPal Cashback Mastercard issued by Synchrony earns unlimited 3% cash back when paying with PayPal and 1.5% on purchases everywhere else. Cash back is redeemed into a PayPal account.

Fidelity® Rewards Visa Signature® Credit Card

While card information for earning and redeeming points indicates that points earned can be redeemed for “a cash deposit into eligible Fidelity account(s), travel, merchandise, gift cards, or statement credit,” it also states that “the 2% cash back value applies only to points redeemed for a deposit into an eligible Fidelity account.” Since the value earned for other options is equal to or less than 2%, we’re considering this as a 2% cashback card. The same rate applies regardless of the cardholder’s Fidelity account balance.

American Express Blue Business Cash™ Card

The Blue Business Cash™ Card (see rates and fees) has a simple earning structure. It earns 2% cash back on all purchases (on up to $50,000 per year). The concern about paying taxes with this card is that it might not be profitable because the early 2025 processing changes make it more difficult to pay with American Express business cards and keep fees under 2%.

Cards Earning Points and Miles

Most cards recommended below earn flexible currency instead of airline or hotel loyalty program points and miles. That’s because airline and hotel cards rarely earn more than 1 point or mile per dollar on general spending like tax payments.

While determining the value of points that can be transferred to airline and hotel programs is subjective, N flexible currency points generally are more valuable than N% cashback for people who understand points and miles and redeem flexible currency selectively to get better value.

If you think of paying taxes with a rewards credit card as buying points, the table below shows the cost per point (in cents) for combinations of processing fees and card earning rates.

Tax processing fee %If card earns 1.5 points per $1If card earns 2 points per $1
1.75%1.150.86
1.85%1.210.91
2.89%1.871.40
2.95%1.911.43

The table below shows how to translate flexible currency earning rates to cashback rates at different point valuations.

Personal value of 1 flexible currency pointFlexible currency earning rate (per point)Cash back equivalent
1 cent1.51.50%
1.5 cents1.52.25%
2 cents1.53%
1 cent22%
1.5 cents23%
2 cents24%

There are several credit cards that earn 1.5 to 2 flexible points per dollar spent on eligible purchases, without considering bonus categories or other spending threshold rewards. Choosing among these options depends on which program(s) work best for you and whether you have consumer and/or business credit cards.

American Express Membership Rewards

The only American Express card that meets the 1.5X or 2X point earning threshold for tax payments on a consistent basis is the Blue Business Plus Credit Card (see rates and fees) that earns 2X points per dollar on all purchases (up to $50,000 per year).

The Blue Business® Plus Credit Card from American Express

The Blue Business® Plus Credit Card from American Express

Earn 15,000 Membership Rewards® points after you spend $3,000 in eligible purchases on the Card within your first 3 months of Card Membership.

LEARN MORE

Capital One Miles

Capital One has several cards that earn 2X per dollar on most purchases. Capital One flexible currency (named “miles”) can be transferred to airline and hotel programs. Other Capital One cards earn cashback rewards that can be converted to miles.

Consumer cards earning 2X transferable miles include:

Business cards that earn 2X transferable miles include:

Capital One Venture Rewards Credit Card

$250 to use on Capital One Travel in your first cardholder year plus earn 75,000 bonus miles

after you spend $4,000 on purchases within 3 months from account opening.

LEARN MORE 

Capital One Venture X Business Card Art

Capital One Venture X Business

Earn 150,000 bonus miles

after you spend $30,000 in the first 3 months from account opening

LEARN MORE 

Chase Ultimate Rewards

Chase has a consumer card—Chase Freedom Unlimited®—and a business card—Chase Ink Business Unlimited® Credit Card—that each earns 1.5 Ultimate Rewards points per dollar. Points can be transferred to partners if the cardholder also holds a Chase card that earns Ultimate Rewards points and has an annual fee (the Chase Sapphire Preferred® Card, the Chase Sapphire Reserve® and the Chase Ink Business Preferred® Credit Card).

Chase Freedom Unlimited®

Chase Freedom Unlimited®

Earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) – worth up to $300 cash back!

Chase Ink Business Unlimited® Credit Card

Earn $750 bonus cash back after you spend $6,000 on purchases in the first 3 months from account opening.

LEARN MORE 

Citi ThankYou® Rewards

The Citi Double Cash® Card earns 2X ThankYou® Points per dollar spent—structured as 1% when you buy and another 1% when you pay—on all eligible purchases. To transfer points to most airline and hotel partners, it’s necessary to hold a premium Citi card, either the Citi Strata Premier℠ Card or the Citi Prestige Card (not available for applications).

Citi Double Cash

Citi Double Cash® Card

Other Programs

One co-branded airline credit card that earns 1.5X miles on all purchases—except its 3X miles bonus categories for Air France, KLM Royal Dutch Airlines and SkyTeam member airlines purchases—is the Bank of America Air France KLM World Elite Mastercard®.

Making Multiple Payments

There are several reasons why a taxpayer might want to split annual or quarterly tax payments on two or more credit or debit cards, and there are some things to keep in mind when splitting payments.

Spending Toward Multiple Welcome / Spending Threshold Bonuses

If your quarterly estimated taxes are $5,000, and you have two new credit cards with welcome offers after spending at least $3,000 and $4,000 respectively, you could meet the entire minimum spending requirement on one card and part of the requirement on the other card by splitting tax payments.

Managing Spending Amounts (Related to Credit Limits and Utilization)

In some cases, taxes may be more than your preferred card’s credit limit, or you might want to manage credit card utilization—the percentage of your credit limit used—since high utilization can have negative impacts on your credit score and ability to get approved for other cards.

Using Prepaid Debit Cards

Since the amount of each payment is limited to the debit card balance minus the processing fee, larger tax amounts will require multiple payments. It’s also important to consider the limit on the number of payments per tax type and tax period when using debit cards.

For example, if filing taxes as a single taxpayer, you can make two payments per processor for each tax type and period. If your quarterly tax liability is $3,000, you’ll be able to make four payments each quarter. That means you could pay slightly under half of $3,000 using three $500 prepaid debit cards and will have to use a credit card, bank debit card, check or ACH payment for the remaining amount.

Using PayPal with Credit Cards

Both IRS tax processing companies allow PayPal as a payment method. There can be advantages to using PayPal with a credit card as the selected payment method in PayPal instead of using the credit card as the payment method on the tax processor’s website.

One reason to pay with PayPal is to provide a workaround when getting the error message “Commercial cards cannot be used to pay personal taxes…” through ACI Payments. This message occurs when attempting to pay with many business cards. Taxpayer data points and blog posts indicate that business cards being rejected as a direct payment method on ACI Payments may be accepted through the company when choosing PayPal as the payment method and using the same credit card in your PayPal wallet.

Another reason to use PayPal is that PayPal sometimes is a bonus category for credit cards that have rotating bonus categories earning 5X points up to $1,500 spending per quarter. In particular, the Chase Freedom Flex and the original Chase Freedom cards have included PayPal as a bonus category during the fourth quarter (October to December) every year for several years through 2024. The Discover it® cards also have included PayPal as a bonus category in the past, but the last bonus was in 2022.

There were reports in previous years of PayPal being a useful workaround for other situations, but these approaches may not be working now. First, some prepaid debit cards that weren’t accepted on tax processors’ sites were accepted through PayPal. There also were reports of payments through PayPal being charged lower fees compared to paying with the same card on processors’ sites.

Final Thoughts

Although paying taxes isn’t fun, there’s an opportunity to earn cash back, points, miles or other rewards when paying with the right credit cards. Key considerations for your decision include:

  • The most important thing is making sure that the value of the rewards earned more than offset the credit card processing fees.
  • The best credit cards to use for tax payments are ones with lucrative welcome bonuses for meeting minimum spending requirements.
  • Paying taxes with credit cards also is useful for increasing spending on cards that offer additional benefits after meeting specific spending thresholds.

The post How to Earn Points and Miles by Paying Taxes appeared first on MileValue.