Is It Worth Paying Your Taxes On A Credit Card To Earn Miles? Is The SPG AMEX The Card To Use For 2018?

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Update: Just a reminder that today is tax day.

If you want to take advantage of the ability to earn 1 Starpoint per dollar (3 Marriott points per dollar) then you can pay taxes on your Starwood AMEX now. A $20,000 tax payment will cost $374, but you will earn 20,374 Starpoints which will convert into 61,122 Marriott points. That’s like buying Starpoints for 1.84 cents each or buying Marriott points for 0.61 cents each.

Buying Marriott points at 0.61 cents means being able to stay in a top-tier SPG, Marriott, or Ritz-Carlton hotel that will cost 60K Marriott points in August for just $366. A 5 night stay will cost 48K points per night or just $292.80 per night!

That will include hotels like the S. Regis Bal Harbour, the S. Regis Princeville, Kauai, the Gritti Palace Venice, the Ritz-Carlton Bal Harbour, the Ritz-Carlton South Beach, the Ritz-Carlton New York/Central Park, or the Ritz-Carlton Tokyo where paid rates can top $1,000/night in peak season. 

Starting on August 1 you’ll only earn 2 Marriott points (0.67 Starpoints) per dollar spent, so you’ll want to also make any estimated payments on the card by 7/31.


Originally posted on 4/12:

On the IRS website you can find a processor that charges 1.87% to process your tax payment via credit card. You can make estimated payments at any time.

That tax payment fee may be tax-deductible, you should speak to a tax professional about that. If you can deduct the fee on your personal or business taxes that will change the math below based on your marginal tax rate.

You can also request a refund for any overpayment and the IRS will cut cut you a check or a direct deposit into your checking account.

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.

But what about if you don’t have any spend thresholds to meet?

-The AMEX Blue Business Plus offers 2 points per dollar spent everywhere.

A $10,000 tax payment will cost $187, but you will earn 20,374 points. If you value your AMEX points at 1.6 cents each, that a value of $325.98 worth of points. You can transfer those points into miles with airlines like British Airways, Delta, El Al, Singapore, Virgin Atlantic, and more.

Note that you only earn 2 points per dollar on $50,000 of annual spending.

 

-The Chase Freedom Unlimited card earns 1.5 Chase Ultimate Rewards points per dollar spent. Click Here to get more details on this card and compare to other cards! 

A $10,000 tax payment will cost $187, but you will earn 15,281 points. If you value your Chase points at about 1.9 cents each, that a value of $290.34 worth of points. If you or someone in your household has a Sapphire Preferred/Reserve or Ink Bold/Plus/Preferred you can transfer those points into airline miles or hotel points. If you have a Sapphire Reserve you can also redeem those points for 1.5 cents each towards travel.

 

-The Chase Freedom card earns 5 Chase Ultimate Rewards points per dollar spent on Paypal this quarter. Click Here to get more details on this card and compare to other cards! 

The 1.87% processor does not accept Paypal, but the 1.97% processor does.

A $1,471 tax payment will cost $28.98, but you will earn 7,500 points. If you value your Chase points at about 1.9 cents each, that a value of $142.50 worth of points. If you or someone in your household has a Sapphire Preferred/Reserve or Ink Bold/Plus/Preferred you can transfer those points into airline miles or hotel points. If you have a Sapphire Reserve you can also redeem those points for 1.5 cents each towards travel.

Note that the 5 points per dollar bonus is limited to $1,500 in spending per quarter, though it helps to have multiple Freedom cards as I do to increase those limits.

 

-The Barclays Arrival® Premier World Elite Mastercard® offers 2 Arrival Premier miles per dollar plus 15K bonus miles for spending $15K plus another 10K bonus miles for spending $25K. That’s 3 miles per dollar if you spend $15K or $25K per year. You can view the rates and fees here.

A $15,000 tax payment will cost $280.50, but you will earn 45,000 Arrival Premier miles. You can use those Arrival Premier miles for a $450 statement credit for any travel purchase. You can also transfer those miles into 32,142 miles with an airline like Qantas, which can book El Al tickets with no fuel surcharges.

 

-The Citi Double Cash card gives 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:

 

 

-The Starwood Consumer AMEX offers the ability to transfer points into dozens of different airlines at a 20K:25K ratio, effectively 1.25 miles per dollar spent everywhere. Points can also be transferred to Marriott, so that 18.6K Starpoints can become 25K United miles and 90K Starpoints can become 132K United miles plus 7 nights in a hotel.

-The Starwood Business AMEX offers the same benefits as the consumer card.

 

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

  • The JetBlue Plus World Elite Mastercard offers mosaic status for spending $50K annually.
  • The Delta Platinum card offers elite qualifying miles for meeting annual spend thresholds. 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 elite status. 
  • The Delta Reserve card offers elite qualifying miles for meeting annual spend thresholds. If you spend $25K/year you’ll also waive the requirement to spend a minimum amount on Delta flights to earn elite status. 
  • United cards waive the requirement to spend a minimum amount on United in addition to flown miles to earn elite status if you spend $25K/year.
  • The Chase Ritz Carlton card gives Marriott and SPG Gold status for spend $10K/year and Platinum status for spending $75K/year.
  • The Chase Marriott card gives an elite night credit for every $3,000 spent, with no limit on the number of credits you can earn. Click Here to get more details on this card and compare to other hotel cards!
  • The AMEX Hilton Honors Ascend card offers a free annual night for spending $15K/year.
  • The AMEX Hilton Honors Business card offers a free annual night for spending $15K/year and another annual night for spending another 45K/year.
  • The Chase Southwest Business card gives companion pass status with unlimited free uses until the end of the next calendar year if you earn 110K points in a year across all Southwest cards. Click Here to get more details on this card and compare to other hotel cards!
  • The Chase Southwest Plus card gives companion pass status with unlimited free uses until the end of the next calendar year if you earn 110K points in a year across all Southwest cards. Click Here to get more details on this card and compare to other hotel cards!
  • The Chase Southwest Premier card gives companion pass status with unlimited free uses until the end of the next calendar year if you earn 110K points in a year across all Southwest cards. Click Here to get more details on this card and compare to other hotel cards!
  • The Citi AA Executive card awards 10K elite qualifying miles for spending $40K/year:

 

 

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 flight from Cleveland (or Chicago, Detroit, Miami, Montreal, Orlando, Pittsburgh, Toronto, etc) to NYC that can cost $500 each way, I can instantly transfer 7.5K points to British Airways to book a short-haul on American with no last minute booking fees. Or if American doesn’t have availability I can instantly transfer 10K points to United for their short-haul award. That’s a value of up to 7 cents per point.
  • 76K 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.
  • If I want to stay in a 5 star Park Hyatt in the Maldives, Melbourne, NYC, ParisSydney, or Tokyo that would cost over $1,000/night, I can instantly transfer 25-30K points to Hyatt to do that, a value of up to 6 cents per point.
  • 40K Starpoints transfer into 50K Alaska miles, enough for a round-trip flight between JFK and Vancouver in Cathay Pacific business class or a one-way business class flight on Cathay Pacific from JFK to Hong Kong. With 62.5K Alaska miles you can even fly in business class from JFK to Tel Aviv to Johannesburg with a free stopover in Hong Kong for as long as you want.

You can make 2 payments per credit card processor for each quarterly estimate or for your year end bill. You can make another 2 payments each time by using a spouses name to pay.

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

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90 Comments On "Is It Worth Paying Your Taxes On A Credit Card To Earn Miles? Is The SPG AMEX The Card To Use For 2018?"

All opinions expressed below are user generated and the opinions aren’t provided, reviewed or endorsed by any advertiser or DansDeals.

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Ron

I use the bank of america premium rewards card….2.2625% cashback so it’s a positive gain for me.

Joseph Bloch

Where would you apply for the 2.2625 cash back card

Laya

Is it worth it to pay taxes using United explorer credit card? How much is each point worth?

Sea Pea Eh?

Any fee you pay in 2018 for your 2017 taxes is not deductable on your 2017 taxes as you did not incur the expense in 2017! That not only includes the fee for using a credit card,but also includes any fees you incur for using a tax professional or tax software.
So while Dan says the fee may be deductable, keep in mind it may only be deductable NEXT year when you file your 2018 taxes.

zow

Dan,
I actually have a refund coming on my return this year. My instinct is that sending in a tax payment, on the expectation that all of it would be refunded by check, might trigger a red flag. I hate to mess with the IRS.
What are your thoughts on intentional overpayment?

Eli

Dan,

What’s the difference between the IRS link you provided which is starting at 1.87% and this link at 2.35%?

https://www.irs.gov/payments/pay-by-debit-or-credit-card-when-you-e-file

This has been bugging me for a while now.

Thanks.

Moish

What about amex platinum? 50 percent bonus miles on transaction over $5k. Is it worth the fee?

Sam

Where can i sell my chase miles for 1.9 cents per mile?

Guru

I have to postpone the completion of my taxes and I expect to have a refund. Can I make an additional CC payment in say September and then file my finalized taxes right after, thereby collecting the spread over a short period of time, increasing my rate of return?

dan1

Dan, if paying now for 2017 return, when will the irs refund if it’s an overpayment? thx

Roy

Hi Dan – does it make sense with the Chase Sapphire Reserve? Thanks!

exShoYoGuy

You can only request a refund next year tax season?? I overpaid $2,000 this week for 2017 taxes. I can’t call them now and ask for a check?

Work-for-ur-muny

So assuming I will maximize my Freedom spending anyway, I should definitely go with the 1.87% over the 1.97%, correct?

Yitz

The credit card fees were deductible as miscellaneous itemized deduction (https://www.irs.gov/newsroom/credit-and-debit-card-fees-related-to-tax-payment-are-deductible), however Tax Reform got rid of miscellaneous itemized deductions, so by the time you want to deduct (on your 2018 return) the deduction will not be available.

Yitz

The above is only for personal taxes. Business taxes are a different story.

haltkup

Would paying with gift cards as debit work? might be a better deal to buy $500 gift cards for 2-5 points and total fee under $8 per $500

Joseph

Dan ,
Thanks for sharing. Is there a way to get United elite status with just dollars spent not actually flying?

Mentch

Only up to platinum level, not 1k

Queenz

Which chase card grants United Platinum purely on basis of CC spend?

Silver

How do get that high i only know how to get to silver

saul feldman

hey I’m surprised none of you guys are into the Alliant 3% cash back card. It get you get you a statement credit every month. No international service fees,

Woof

Thanks for the info. Any sign up bonus? How is your experience with their customer service and IT system? I never heard of it before.

King balak

No signup bonus I believe there might be a yearly fee that’s way of during the first year, just Google Alliant 3%. Customer service is so so, for example my card was just stolen and I had to cancel the card and they offered to send me a new one in 7 to 10 business days. When I told them that wasn’t acceptable they tried to charge me $22 for the replacement and I got them to waive the replacement fee but it is only arriving in 3 or 4 days .
Not like American Express where the card is automatically sent to you the next afternoon also. To dispute a charge one has to call them versus just filing something online or chatting like when Kenzie white American Express

There are no international service fees which makes it very useful for traveling overseas. There are no included insurances, so don’t use it to rent your cars or to make expensive purchases. But for regular stuff, 3% cash back on every bill.

Yes you cant sell your miles or wait for good deals (thank you Dan thank you Dan), but it is easy happens pretty automatically and it is consistent.

I have been using them for about 9 months so far

Woof

Thanks very much for the info. I will look into this.

Issues with customer service: just incompetence everywhere, at credit unions and even big players like BoA. I guess we have to get used to the “new normal”.

King balak

but the 3% cash back that they promised works like a charm each time, the no international service fees works like a charm, as long as there are no issues everything is perfect if there is an issue like having to dispute a charge or getting a replacement credit card, it is way harder than with American Express

Joe

If you get 1 chase point dan suggest apply for freedom
If you pay $500 on tax, would not do new cc application
Plus 5/24 so need to think well before getting another card
Also my tax practioner doesn’t reccomand overpay to accumulate points , nor my rabbi

yonah

Dan – two q’s:
– The Freedom Card is freedom unlimited, and not the Standard Freedom Card, correct?
– For the JetBlue card, the only reason to use it would be to get closer to Mosaic, correct?

Al

Why do you value Chase points at 1.9 cents each instead of 1.5?

Doug

The bottom line for most is this: Paying taxes can be worth it if it is done to meet minimum spend for a new card bonus.

Generally, it is NOT worth it for regular spend because the return is pretty measly compared to the fee PLUS the fact that you must put the money out until you file that year’s tax return.

Michele

Capital One Venture Card. Two points per $ spent. Is it worth it?

Laya

How much are United points worth? If I don’t have any other cards will it still be worth it to pay taxes using United Mileage Plus card?

RW

Hi,
In Israel where the tax system is different…
do you know which diners card is worth using and how the process is?

Thank you!

Prince

Hey dan
This is only somewhat related . I often sell my points for cash (check) . Do you know if that would b concidered income ? Like would I have to report that ? Is this perhaps something you already discussed sometime somewhere u may have a link ?

Ricki

I live in Israel. First and foremost i have to have a card that has no foreign transaction fees. I have been using Capital One for years. I was unhappy with their dispute department recently, so I have begun to explore other cards. Does anyone have recommendations for a credit card to use in Israel?

Morris

I’ve decided to go with a Citi (Premier or Prestige) and Barclay Arrival Premier combo for the Qantas points/cashback versatility for flights on El Al (mostly to Europe and the U.S.). It may not be the ultimate best value, but El Al has great availability usually and you can’t beat $0 surcharges. The Citi guarantees 3X points for travel/gas (if Premier), 2X entertainment/dining, whereas the Barclay guarantees at least 1.43 points for everyday spend (and over 2.1 if you meet their $15K/$25K thresholds). Plus you still retain a few other interesting partners for flights ex-TLV, like FlyingBlue and Etihad (flight to Belgrade on Air Serbia is good value!), and of course JAL. On top of that, you never know when Citi might offer a transfer bonus to one of their partners.

Dan: was just approved yesterday for the Citi Premier (50K offer) via your link, just a little way to say thanks!

Death & Taxes

Are there similarly priced processors for NY or NJ?

Stuie

Dan, you don’t discuss the United MasterCard or Visa cards much. Any thoughts on their value?

Ryan

Doesn’t it make more sense to pay with the Discover Debitcard for 1% cash back on upto $300? The fee is $2.59 only.

Ryan

Sorry..I meant upto $3000 for a $30 cashback.

GG

dan what you think about Capital One Visa Venture Rewards Card 2x Miles per each dollar spent?

Stuie

Should I be loyal to the united card if I’m a loyal united traveler??

MK

Do the SPG point need to be transferred to Marriott prior to Aug 1st to get 3 Marriott points?

Qantas

Freedom worked! TY
Would CSR reserve have x5?

Mo

Thanks for this idea!
Found myself needing to pay a big chunk, and using my 2% cash back card gives me an extra month+ to gather the cash to pay off the card.
Plus if I can write it off next year…

Sean

Is paying taxes using a business ink cash card considered a cash like transaction?

Qantas

Got confirm from vendor with transaction number, but nothing shows on chase CC yet. anyone else?

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