If you have to pay quarterly taxes, many people believe you might as well earn some travel rewards while doing so. Unfortunately, not everyone considers the costs of charging their quarterly federal taxes to a credit card.
Before you can determine if the rewards are worth it, you really do need to consider these costs.
Fortunately, IRS.gov lays it out fairly plainly, noting the various costs of using different, approved services to pay taxes with a credit card. Fee schedules for three different services are as follows:
-PayUSATax.com: You'll pay 1.98 percent (minimum of $2.69) to charge your federal taxes with this method.
-Pay1040.com: You'll pay a 1.97 percent fee with a minimum of $2.59.
-OfficialPayments.com/fed: You'll pay a 2 percent flat fee with a minimum of $2.50.
To pay your quarterly taxes with a rewards credit card and actually end up ahead, you'll obviously need to get a greater rate of return than the fees you'll pay along the way. Since you'll pay a minimum of 1.87 percent with Pay1040.com, that means you'll need to find a travel credit card that doles out a higher rate of rewards to benefit.
Some cards to consider include:
Discover it Miles
The Discover it Miles lets you earn 1.5 percent back for every dollar you spend with no annual fee. The kicker is, Discover is currently promising to double your rewards the first year, effectively pushing your rate of return up to 3 percent. You can redeem your points for statement credits to cover travel purchases.
While using one of the cards to pay your quarterly taxes to rack up rewards can make mathematical sense, the best way to boost your earnings is to align your quarterly tax payment with a new rewards card signup in order to score a big signup bonus.
If you signed up for the Ink Preferred Business credit card and used it to pay at least $5,000 in quarterly taxes and other business expenses within the first three months of account opening, for example, you would earn a flat 1 point per $1 spent at minimum plus 80,000 points worth $1,000 in travel or $800 in cash back right away.
As always, you should make sure you can pay your credit card bill off right away as well. If you wind up carrying a balance and paying interest on your charges, you will end up worse off in the long run.
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