2022: With Lower Processing Fees, Is It Worth Paying Taxes On A Credit Card To Earn Miles, Elite Status, Or A Companion Pass? A Breakdown By Card Benefits And Value

By
Dan
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Update, 4/18: Today is tax day! Which card will you use to pay your taxes?

Originally posted on 1/18/22:

Last year it cost 1.96% to pay your federal income taxes with a credit card.

Luckily not everything is subject to inflation. You can now pay just 1.87% to process your tax payment via credit card! You can make estimated payments at any time. 2021 Q4 estimates are due today.

You can make 2 payments per credit card processor for each quarterly estimate (1040-ES) and for your year end bill (1040). You can make another 2 payments each time by using a spouse’s information to pay, though you will want to call the IRS to confirm that they link that payment to your joint return as that doesn’t always happen automatically.

You can also make 2 payments each for an extension of time to file (4868) and you can make payments for past amended returns (1040X).

The tax payment fee may be considered a business expense, which will significantly change the math below based on your marginal tax rate. Be sure to speak to a tax professional about that.

Tax payments are considered a regular purchase, not a cash advance.

You can also request a refund for any overpayment and the IRS will cut you a check or a direct deposit into your checking account. You may even wind up getting paid interest by the IRS if the refund check is delayed.

It can definitely make sense to pay your taxes via credit card if you are signing up for a card and are trying to reach a spend threshold to earn a signup bonus that you won’t be able to reach without some help. The 1.87% fee pales in comparison to earning a mega signup bonus as well as the regular miles on the purchase.

Big welcome bonuses are currently available on cards like:

Even if you don’t have a new card, it can still make sense to pay your taxes with a credit card for the rewards and the extra time to pay.

In order to determine if it’s worth earning miles at a 1.87% rate, you’ll need to assign a value to each currency. Values are highly subjective and will vary based on what you use the miles for, so YVMV (Your valuation may vary!).

  • The Blue Business℠ Plus Credit Card from American Express offers 2 points per dollar spent everywhere. If you open this card now you would also earn 15K points for spending $3,000 in 3 months. No annual fee.
    • A $10,000 tax payment will cost $187, but you will earn 20,374 points. If you value your AMEX points at 1.4 cents each, that a value of $285.24 worth of points. You can transfer those points into miles with airlines like Avianca, British Airways, Delta, Singapore, Virgin Atlantic, and more.
    • Note that you only earn 2 points per dollar on $50,000 of annual spending, though if you have multiple primary cards they would get 2 points per dollar on $50,000 of annual spending on each card.
  • The Chase Ink Business Unlimited Card earns 1.5 Chase Ultimate Rewards points per dollar spent everywhere. If you open this card now you would also earn $750 in the form of 75K points for spending $7,500 in 3 months. No annual fee.
    • A $10,000 tax payment will cost $187, but you will earn 15,281 points. If you value your Chase points at 1.5 cents each, that a value of $229.22 worth of points. If you or someone in your household has a Sapphire Reserve, Sapphire Preferred, or Ink Preferred card then you can transfer points to one of those cards and from there to airlines like United and hotel programs like Hyatt. Alternatively if you have a Sapphire Reserve you can also redeem those points for 1.5 cents each towards travel or Pay Yourself Back, while having the Sapphire Preferred or Ink Preferred card would also you to redeem those points for 1.25 cents each towards travel or Pay Yourself Back.
  • The Chase Freedom Unlimited card earns 1.5 Chase Ultimate Rewards points per dollar spent everywhere and 3 points per dollar on up to $20,000 spent during the first year of cardmembership via this link. No annual fee.
    • A $10,000 tax payment will cost $187, but you will earn 15,281 points. If you value your Chase points at 1.5 cents each, that’s a value of $229.22 worth of points. If you get this card with an offer to earn 3 points per dollar, you would earn 30,561 points. If you value your Chase points at 1.5 cents each, that’s a value of $458.42 worth of points. If you or someone in your household has a Sapphire Reserve, Sapphire Preferred, or Ink Preferred card then you can transfer points to one of those cards and from there to airlines like United and hotel programs like Hyatt. Alternatively if you have a Sapphire Reserve you can also redeem those points for 1.5 cents each towards travel or Pay Yourself Back, while having the Sapphire Preferred or Ink Preferred card would also you to redeem those points for 1.25 cents each towards travel or Pay Yourself Back.
  • The Business Platinum Card® from American Express offers 1.5 points per dollar spent everywhere on transactions that are $5,000 or more.
    • A $10,000 tax payment will cost $187, but you will earn 15,281 points. If you value your AMEX points at 1.4 cents each, that a value of $213.93 worth of points. You can transfer those points into miles with airlines like Avianca, British Airways, Delta, Singapore, Virgin Atlantic, and more.
    • You can earn 1.5 points per dollar on up to $2,000,000 of annual spending.
    • Having this card allows you to get 35% of your AMEX points rebated on all business/first paid airfare and on coach airfare with the airline of your choice, up to 1,000,000 bonus points per calendar year.
  • The Citi Double Cash card earns 2% cash back, so you’ll come out .13% ahead of the 1.87% tax processing fee. Even if you don’t want to deal with the miles aspect of this, the 2% cash back makes it a no brainer to use.
    • You can also transfer points from this card to a Citi Premier Card, from where you can transfer points to airlines like JetBlue, Turkish, Qantas, and more. A $10,000 tax payment will cost $187, but you will earn 20,374 Citi ThankYou points. If you value your Citi ThankYou points at 1.4 cents each, that a value of $284.86 worth of points. If you also have a Citi Rewards+ Card you’ll get a 10% rebate on point redemptions and transfers, making the points even more valuable.

Other cards offer benefits for hitting spend thresholds, which tax payments can help with:

Earn AA elite status and companion certificates:

  • The Citi Business AA Platinum card offers a free domestic companion certificate for spending $30K/year and earns 1 loyalty point per dollar spent to earn AA status.
  • The Citi AA Executive card earns 1 loyalty point per dollar spent to earn AA status plus earns a bonus 10K loyalty points for spending $40K/year.
  • The Citi AA Platinum Consumer card earns 1 loyalty point per dollar spent to earn AA status, plus offers a $125 AA flight discount if you spend $20K/year.
  • The Citi AAdvantage MileUp Consumer Mastercard earn 1 loyalty point per dollar spent to earn AA status.
  • You’ll need to earn 30K loyalty points for Gold, 75K for Platinum, 125K for Platinum Pro, and 200K for Executive Platinum status. I value AA miles at about 1.3 cents each, so if you’re paying taxes at a cost of 1.87 cents each, that would be valuing each loyalty point at roughly 0.57 cents each. That would put the cost of Gold status at $171, Platinum at $427.50, Platinum Pro at $712.50, or Executive Platinum at $1,140. Status earned now would be valid through 3/31/24. You can read more about loyalty points here and here.

Earn Southwest elite status and Companion Pass:

Earn Hyatt elite status, upgrades, and bonus free nights:

  • The Chase World Of Hyatt Consumer Credit Card offers a 2nd annual anniversary night if you spend $15K in a cardmembership year. If you open a new card you can also earn up to 60K bonus points with $15,000 of spending within 6 months.
  • This card also offers 5 elite qualifying night credits every year and you’ll earn an additional 2 night credits towards elite status with every $5,000 that you spend.
  • The Chase World Of Hyatt Business Credit Card earns 5 night credits towards elite status with every $10,000 that you spend. If you open a new card you can also earn 60K bonus points with $5,000 of spending within 3 months.
  • It also offers a 10% rebate on award stays, up to 20K rebated points, after you spend $50,000 on the card in a calendar year.

I value Hyatt points at about 1.5 cents each, so depending on how many additional free nights and elite status benefits you can rack up and how you value those free nights and benefits, it can make sense to put tax payments on this card.

Here is what you can earn with Hyatt elite status nights:

  • Free anniversary night at category 1-4 hotels without any spending required.
  • Spend $15,000 on the consumer card and you’ll get a 2nd free anniversary night at category 1-4 hotels.
  • Earn 20 night credits and you’ll get 2 club lounge awards that are valid for club access for the duration of your Hyatt stay.
  • Earn 30 night credits and you’ll get Explorist status, 2 more club lounge awards, and another free night at category 1-4 hotels.
  • Earn 40 night credits and you’ll get a $100 Hyatt gift card or 5,000 bonus points.
  • Earn 50 night credits and you’ll get 2 confirmed suite upgrades that are each valid on paid or award stays of up to 7 nights.
  • Earn 60 night credits and you’ll get Globalist status, 2 more confirmed suite upgrades on paid or award stays, and a free night at category 1-7 hotels.
  • For every additional 10 night credits you’ll get another confirmed suite upgrade or 10,000 Hyatt points.

Earn Marriott elite status and bonus free nights:

  • The Marriott Bonvoy Business™ American Express® Card offers a 2nd annual free night for spending $60K in a calendar year. This card also offers Marriott Gold status for spending $35K in a calendar year.
  • The Chase Marriott Boundless Consumer Card (and the discontinued Bonvoy Consumer AMEX) offers Marriott Gold status for spending $35K in a calendar year.
  • The Marriott Bonvoy Brilliant Consumer AMEX (and the discontinued Ritz-Carlton card) offer Platinum status for spending $75K in a calendar year. You’ll need to determine how to value having Platinum status to see if its worth putting tax payments on this card.
    • I value Marriott points at about 0.6 cents each, so depending on how many additional free nights and elite status benefits you can rack up and how you value those free nights and benefits, it can make sense to put tax payments on this card.

Earn JetBlue elite status:

  • The JetBlue Plus World Elite Mastercard offers Mosaic status for spending $50K annually or Mosaic+ for spending $150K in 2022.
    • JetBlue points are a fixed value currency, so there are no aspirational aspects to this program as points will typically be worth between 0.9-1.3 cents each. You’ll need to determine how to value having Mosaic status to see if its worth putting tax payments on this card.

Earn Delta elite status:

  • The Delta Platinum Consumer and Delta Platinum Business cards offers 10K Medallion Qualifying Miles for spending $25K and 20K Medallion Qualifying Miles for spending $50K. If you spend $25K/year you’ll also waive the requirement to spend a minimum amount on Delta flights in addition to flown miles to earn Silver, Gold, or Platinum elite status. If you spend $250K/year you’ll also waive the requirement to spend a minimum amount on Delta flights in addition to flown miles to earn Diamond status.
  • The Delta Reserve Consumer and Delta Reserve Business cards offers 15K Medallion Qualifying Miles for spending $30K, $60K, $90K, and $120K.If you spend $25K/year you’ll also waive the requirement to spend a minimum amount on Delta flights in addition to flown miles to earn Silver, Gold, or Platinum elite status. If you spend $250K/year you’ll also waive the requirement to spend a minimum amount on Delta flights in addition to flown miles to earn Diamond status.

Earn United elite status:

Earn Air Canada Aeroplan status or a companion pass:

  • The Chase Aeroplan Card offers 25K status for spending $15K/year through the following calendar year.
  • If you spend $50K in a calendar year you will gain a level of status.
  • Upon spending $100,000, $250,000, $500,000 and $750,000 in a calendar year you’ll earn a 50% off Priority Rewards redemption certificate.
  • If you spend a whopping $1,000,000 in a year you’ll get a companion pass that allows unlimited free companion award travel systemwide in any class of service. That pass will be valid for the rest of the calendar year in which you spend the million bucks and for the following calendar year.

Earn a British Airways companion pass:

  • The Chase British Airways Card offers a free one-time use companion pass for spending $30K/year. If you open a new card you can also earn 100K bonus Avios for spending $5,000 in 3 months.
  • The free companion pass is valid on BA award tickets worldwide, though fuel surcharges will apply.
    • I value BA Avios at about 1 cent each. You’ll need to determine how to value the companion pass to see if its worth putting tax payments on this card.

Earn an Aer Lingus companion pass:

  • The Chase Aer Lingus offers a companion ticket good when booking a paid economy Aer Lingus ticket if you spend $30,000 in a calendar year. If you open a new card you can also earn 100K bonus Avios for spending $5,000 in 3 months.

Earn a $1,000 Iberia voucher:

  • The Chase Iberia: offers a $1,000 discount voucher off 2 tickets on the same Iberia flight if you spend $30,000 in a calendar year. If you open a new card you can also earn 100K bonus Avios for spending $5,000 in 3 months.

Earn Hilton elite status and bonus free nights:

Is it worth it? It all depends on what you do with your miles. This isn’t the cheapest way to earn miles, but it’s painless. The ability to overpay your taxes to reach a threshold is also helpful.

The value of airline miles is huge if you fly last-minute, one-way, or in business or first class internationally.

  • If I need a last minute short-haul flight like Cleveland-NYC that can cost $500 each way, I can instantly transfer 6K miles to Air Canada, 6.5K points to Avianca Lifemiles for travel on United or 7.5K points to British Airways to book a short-haul on American with no last minute booking fees. That’s a value of up to 7 cents per point.
  • With 7.5K Turkish miles I can book a one-way flight on United to anywhere in the US, even Hawaii or Alaska. In business class it’s just 12.5K miles each way!
  • With 32K Turkish miles I can book a one-way flight on United to Israel, even Hawaii or Alaska. In business class it’s just 47K miles each way!
  • 86K points transferred to Singapore is enough for a ticket in a private couples suite on an A380 one-way from JFK to Frankfurt with no fuel surcharges.
  • If I want to fly in a $25,000 ANA First Class Suite round-trip from the US to Tokyo, I can instantly transfer 110K or 120K points to Virgin Atlantic. That’s a value of up to 23 cents per point.
  • 120K Marriott points transfer into 50K Alaska miles, enough for a one-way business class flight on Cathay Pacific from the US to Hong Kong. With 62.5K Alaska miles you can even fly in business class from JFK to Tel Aviv or Johannesburg with a free stopover in Hong Kong for as long as you want.
  • If I want to stay in a 5 star Park Hyatt in the Maldives, Melbourne, NYC, Paris, Sydney, or Tokyo that would cost over $1,200/night, I can instantly transfer 20K-30K points to Hyatt to do that, a value of up to 6 cents per point.
  • Learn more about which points transfer to which airlines and how long those transfers will take here.

Which card do you use to you pay your taxes? Or is it too pricey of a method to get miles? Sound off in the comments!

56 COMMENTS

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  1. MN
    Link Reply

    I tried the 1.87% site a few days ago to make an estimated payment and I couldn’t get it to go through. It kept getting stuck at one point in the process.

  2. Jim
    Link Reply

    ‪Will paying with a Metabank VGC result in a fee of $2.50 (consumer/personal debit cards) or 1.87% (all other debit cards)?‬

  3. Yitz
    Link Reply

    The “is it worth it” section is GOLD! Thanks for spelling all that out!

  4. exShoYoGuy
    Link Reply

    Dan, did I understand correctly that I can make two payments under my social and another 2 under my wife’s across all 3 processing places for a total of 12 payments each quarter and all I have to do is call them and make sure they are joined?

    Also if I submit a payment u under both our socials accidently, can I still submit taxes filing separately?

  5. nsx at FlyerTalk
    Link Reply

    Avoid payusatax. They normally work OK, but if there is a problem you won’t be able to fix it. They literally never answer their phone. I tested it by waiting on hold for 8 hours during the day several weekdays in a row.

    They don’t reply to website messages either. It’s as if they laid off 100% of their customer service staff. They need to add a “talk to the hand” image to their website.

    The other two services are fine. Use them.

    • Dan
      Link Reply

      Luckily Pay1040 is now cheaper!

  6. Michael
    Link Reply

    I said this all along about AA- you basically are buying exec platinum for $700 a year. Because if you do the $200k spend at the beginning of the AA year you get exec platinum that year and the following. So you only need to do this every other year- so it’s basically $700 a year for AA executive platinum.

    • Dan
      Link Reply

      Yup, though unfortunately, no systemwide upgrades unless you fly 30 segments.

  7. Michael
    Link Reply

    Also premium Super Bowl tickets and hotel for the weekend with nfl extra points. 425k gets you premium seats and hotel etc for super bowl weekend. So for $7500 in costs you get easily $20k in value it not more

  8. Corky
    Link Reply

    The bolded refund language is a little too close to endorsing tax fraud for this guy.

    • Dan
      Link Reply

      I don’t think you understand what tax fraud is…

  9. Joel
    Link Reply

    Why don’t you overpay and ask back for the money in form of a check

  10. Peretz
    Link Reply

    I thought Credit Card Company TOS restrict clients from assessing fees to customers for swiping their cards?

  11. Abraham
    Link Reply

    Cute!
    I find this post so cute!

  12. Jeff
    Link Reply

    If I overpay then how long does it take to request and get a refund? Does the refund come only after filing my taxes or can I request it sooner? I don’t otherwise make quarterly payments but wonder if I should just to get the min spending and then have the money refunded (or is this only for people who already make quarterly payments?).

  13. LoveCreditCards
    Link Reply

    Dan to confirm, are you saying for example I can make 2 payments on one processor and say I am filing single and only add my social, then do another one for my spouse filing single, and then call the IRS to combine? Since if I select filing jointly they ask for her s.s. number also. So what do I do?

    • Dan
      Link Reply

      They can both be listed as married filing jointly.

  14. LoveCreditCards
    Link Reply

    When I go to pay1040.com it looks like it changed since it used to be Visa debit cards were $2.50 but now it says “Consumer/Personal Debit Cards” are $2.50 and “All Other Debit Cards” are $2.50! Am I correct that Visa debit cards will now be charged 1.87%? 🙁

  15. NoahL
    Link Reply

    Has anyone tried the American Express debit card with their checking account to pay? Seems a no brainer…

  16. Q
    Link Reply

    Are you allowed legally to make an overpayment and then request a refund?

    • Dan
      Link Reply

      It seems like the rate typically stays in effect for the entire calendar year, so this should be good through 12/31/22, but it’s always subject to change without warning.

  18. exShoYoGuy
    Link Reply

    So if I make a payment under mine and a payment under my wife and then call and combine them do I make the payments filing separately? And then call them and tell them we are filing jointly? Because I think if you click filing jointly if forces you to enter the spouses social so how do I go about doing it then?

    • Dan
      Link Reply

      No, you can do filing jointly. You don’t have to enter the spouse’s social.

  19. Ave
    Link Reply

    Can I pay 50k estimated tax on my personal tax return even though I don’t owe anything?

    • dan
      Link Reply

      sure, if you are ok waiting for 1+ years for your money back…
      I did overpay for 2020 not maliciously, only got the money back last month albeit with interest. Many many calls to IRS to get the case going and release the money

      • Dan
        Link Reply

        What interest rate did they pay?

        • dan1
          Link Reply

          looks like ~1.6%

          @jake if someone wants to give irs money and hope that it will all work out, I dont care. Your money, do with them what you want. I am just sharing what happened to me.
          You say “it doesnt normally take that long” and then “they are now very behind” – I’d say this is new normal.

        • Daniel
          Link Reply

          Oh and I got 1099-int from them as well, so that they collect on their interest

      • jake
        Link Reply

        irs should have only paid interest due to delay in processing the return/refund. not the over payment
        please confirm and advise what rate if diff
        and 2020 was a special year. doesnt normally take that long. they are now very behind

        • Ave
          Link Reply

          I can take money from my HELOC for 2.5%,

  20. Frequent Whiner
    Link Reply

    Need to update the post as 2021 4th Q estimated payments were due 2 months ago

  21. BG
    Link Reply

    The new Amex debit card seems like a no-brainer here. Pay a $2.50 fee and get .5 rewards points for each dollar you pay.

    • Dan
      Link Reply

      Did anyone actually test that out?

  22. Joe
    Link Reply

    Using VentureX is a slight money maker, isn’t it? Even if I just redeem the points for 1 cent each against a travel expense, I’d get 2% cash back for a 1.87% fee.

    And a little better for Freedom Unlimited with CSR PYB, it’s 2.25% cb for the 1.87% fee

  23. yo yo
    Link Reply

    can i make a payment after filling, and i don’t owe anything anymore?

  24. nate
    Link Reply

    what about paying state taxes?

  25. yossi
    Link Reply

    Does anyone know how to use the processors with a lower rate while using Turbotax, which is defaulting to a 2.49% fee?

    • JR
      Link Reply

      Yeh you just select I’ll pay later or I’ll send a check. And then you go to another website and take your payment amount and make a payment. That’s what I did

  26. SM
    Link Reply

    HELP: How do you get in contact with someone from the IRS to confirm my spouses payment is linked to our joint return? Is there a time frame for this?

  27. Jeff
    Link Reply

    Is the fee really a business expense? Any accountants with opinions about someone paying personal and business taxes together

    • Mr. Knowitall
      Link Reply

      Definitely NOT a business expenses if used to pay your personal income taxes, which is the subject of this article

  28. Beew
    Link Reply

    PayPal debit card pays 1% and the fee is less than $3. That’s a no-brainer.

  29. Rastafary
    Link Reply

    I have a $2.25 Million tax bill this year. That comes out to $42,075. Are there any caps to how many miles you can earn? Which credit card would be best for this and would you do it?

    • Dave
      Link Reply

      Your questions aren’t convincing that you are filing $2.25M

  30. Valentin
    Link Reply

    I fell in the H&R Block trap: I used their link to pay on the Pay1040.com, ended up paying 2.49%.

  31. AllenM
    Link Reply

    help! trying to use pay1040 using cap1 venture-x card, receiving “The card number entered is not valid. Please verify the card number entered and try again.”. tried my wife’s card as well as she is account owner.

  32. AllenM
    Link Reply

    no clue why but the ACI site accepted the card.

  33. AE
    Link Reply

    With the United bonus PQP offer, at what point do you think it makes sense to chase status via credit cards?

  34. Jew
    Link Reply

    Do I need to call IRS after every payment on spouse? Or is it a 1 time link or wtvr?

    Also, any advice on getting hold of someone there? Every time I call they say “too many callers, call later”

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