I’ve written about paying income taxes with a credit card to meet minimum spending requirements or earn a big spending bonus.
But now folks with the Chase Sapphire Reserve and Freedom Unlimited cards can actually earn a profit paying their taxes.
Even with processing fees, you’ll come out ahead when you pay your taxes with the Freedom Unlimited and transfer the Chase Ultimate Rewards points to your Sapphire Reserve account to redeem for travel.
Combine the Perks of Your Chase Freedom Unlimited and Sapphire Reserve Cards to Pay Taxes and Earn a Profit When You Redeem Points for Big Travel to Places Like Santa Monica, California!
I’ll show you the math!
How to Pay Taxes With a Credit Card
Link: IRS Pay Taxes With a Credit or Debit Card
Link: How to Meet Minimum Spending Requirements by Paying Your Taxes!
The IRS allows you to pay taxes with a credit card. But you must use a 3rd-party payment processor. You can NOT pay the government directly using a credit card.
There are 2 approved IRS payment processors that charge a 1.87% fee when paying with a credit card:
You Can Pay Your Income Taxes With a Credit Card Using 3rd-Party Payment Processors, Like Pay1040.com, for a 1.87% Fee
There are other approved processors, but you’ll pay higher fees.
Note: You will NOT be charged cash advance fees when you pay with a credit card.
Earn a Profit With Tax Payment
Link: Chase Sapphire Reserve
Link: Freedom Unlimited
With the Chase Freedom Unlimited card, you earn 1.5X Chase Ultimate Rewards points per $1 you spend on all purchases with NO limit.
And you can get more value for your Freedom Unlimited points by transferring them to your Sapphire Reserve account. Because each point in your Sapphire Reserve account is worth 1.5 cents when you redeem for travel through the Chase portal.
Here’s how you can earn a profit with your tax payment.
For example, on a $5,000 tax payment, you’d pay:
- $5,093.50 with a credit card ($5,000 x 1.87% fee = $93.50)
If you pay with the Chase Freedom Unlimited, you’d earn:
- ~7,640 Chase Ultimate Rewards points ($5,093.50 x 1.5X Chase Ultimate Rewards points)
Then, transfer the points to your Sapphire Reserve account to redeem for travel through the Chase Travel portal. You’ll get:
- ~$115 worth of travel (~7,640 points X 1.5 cents per point)
So you’ll pay ~$94 in fees for your tax payment. But you will get ~$115 worth of travel. That’s a ~$21 profit (~$115 value of points – ~$94 fee for tax payment)!
Here’s how you’d benefit using different tax payment amounts.
| Tax Payment Amount | Tax Payment with 1.87% Fee | Earn 1.5X Chase Ultimate Rewards Points With Freedom Unlimited | Redeem for Travel With Sapphire Reserve | Profit |
|---|---|---|---|---|
| $5,000 | ~$5,094 | ~7,640 | ~$115 | ~$21 |
| $10,000 | ~$10,187 | ~15,281 | ~$229 | ~$42 |
| $15,000 | ~$15,281 | ~22,921 | ~$344 | ~$63 |
| $20,000 | ~$20,374 | ~30,561 | ~$458 | ~$84 |
Keep in mind, paying taxes with a credit card definitely does NOT make sense if you can’t pay your account off in full. If you carry a balance, the interest you’ll pay will negate the value of the miles and points you’d earn.
Bottom Line
If you have both the Chase Freedom Unlimited and Chase Sapphire Reserve cards, you can earn a profit paying your income taxes with a 3rd-party processor like Pay 1040, even with the fees.
Because the Chase Freedom Unlimited gets you 1.5X Chase Ultimate Rewards points per $1 on all purchases. Then, you can transfer the points to your Sapphire Reserve account to take advantage of the 50% point bonus on travel booked through the Chase portal.
For example, a $5,000 tax payment can earn you a ~$21 profit. While you won’t make a lot of money, it’s an easy way to earn points instead of paying directly from your bank account.
Remember, it’s not worth paying taxes this way if you can’t pay your balance off in full. Because the interest charges will offset the value of the points.
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