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

Never Miss Another Deal - Follow DansDeals on Facebook

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:

• Chase Sapphire Preferred Card: 80K bonus points for spending $4,000 in 3 months. Read more here.
• AMEX Consumer Platinum card: 100K bonus points for spending $6,000 in 6 months. Read more here.
• AMEX Business Platinum Card: 120K bonus points for spending $15,000 in 3 months.  Read more here.
• Capital One Venture X Card: 75,000 bonus miles for spending $3,000 in 6 months, plus earn 2 miles per dollar, for a total of 120,000 miles. Plus get a $300 annual travel credit, 10K miles anniversary bonus, and much more. Read more here.
• Citi Premier Card: 60K bonus points for spending $4,000 in 3 months.
• Chase Ink Business Preferred Card: 100K bonus points for spending $15,000 in 3 months. Read more here.
• Chase Ink Business Cash Card: $750 in the form of 75K bonus points for spending $7,500 in 3 months. No annual fee. Read more.
• Chase Ink Business Unlimited Card: $750 in the form of 75K bonus points for spending $7,500 in 3 months. No annual fee. Read more.
  
• Chase United Club Infinite Card Card: 120K miles for spending $6K in 3 months. Read more.
• Chase United Business card: 75K miles for spending $5K in 3 months. $0 intro annual fee, then $95.
• Chase United Explorer card: Earn up to 70K miles. 60K miles for spending $3K in 3 months and another 10K miles for spending another $3K in 6 months. $0 intro annual fee, then $95. Read more.
• Chase United Quest Card: 70K miles for spending $4K in 3 months. Read more.
  
• Capital One Venture Card: 60,000 bonus miles for spending $3,000 in 3 months.
• The Chase Southwest Business Premier card: 60K points for spending $3K in 3 months. Read more.
• The Chase Southwest Performance Business Credit Card: 80K points for spending $5K in 3 months. Read more.
• The Capital One® Spark® Cash Plus for Business: $500 cash back for spending $5,000 in 3 months plus another $500 cash back for spending $50K in 6 months, plus earn 2% cash back, for a total of $2,000 cash back or 200,000 miles.
• The Chase British Airways Card: 100K points for spending $5K in 3 months. Read more.
• The Chase IHG® Rewards Club Premier Credit Card: 140K points for spending $3K in 3 months. Read more.
• The CitiBusiness AAdvantage Platinum World Mastercard: 65K miles for spending $4K in 4 months. Read more.
• The Citi AAdvantage Platinum World Elite Consumer Mastercard: 50K miles for spending $2.5K in 3 months. Read more.
• The Citi AAdvantage Executive World Elite Consumer Mastercard: 50K miles for spending $5K in 3 months. Read more.
• The Chase World Of Hyatt Business Credit Card: 60K points for spending $5K in 3 months. 

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 Capital One Venture X Card, The Capital One® Venture® Rewards Credit Card and The Capital One® Spark® Miles for Business earn 2 Capital One miles per dollar spent everywhere.
  • A $10,000 tax payment will cost $187, but you will earn 20,374 Capital One miles. If you value your Capital One miles at 1.4 cents each, that a value of $284.86 worth of points. You can transfer those points into miles with airlines like Avianca, Flying Blue, Turkish, Singapore, Qantas, and more.

• 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:

• The Chase Southwest Business Premier card, The Chase Southwest Performance Business Credit Card, The Chase Southwest Priority card, and The Chase Southwest Premier card gives companion pass status with unlimited free uses until the end of the next calendar year if you earn 125K points in a year across all Southwest cards. The cards also offer 1.5K tier points towards A-List status for every $10K spent, with no cap on earnings.
• The Chase Southwest Plus card gives companion pass status with unlimited free uses until the end of the next calendar year if you earn 125K points in a year across all Southwest cards.
  • Southwest points are a fixed value currency, so there are no aspirational aspects to this program as points will typically be worth between 1.3-1.6 cents each. You’ll need to determine how to value having Companion Pass and A-List status to see if its worth putting tax payments on this card.

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.
  • I value Delta miles at about 1 cent each. You’ll need to determine how to value earning qualifying miles and the flight spending requirement waiver to see if its worth putting tax payments on this card.
  • Here is how many MQMs you need to earn Delta status.

Earn United elite status:

• The Chase United Business Card, Chase United Business Club Card, and Chase United Explorer Card earn 500 PQPs for spending $12K or 1,000 PQP for spending $24K.
• Chase United Quest Card earns 500 PQPs for every $12K spent, up to 3,000 PQPs for $72K/year spending.
• Chase United Club Infinite Card Card earns 500 PQPs for every $12K spent, up to 4,000 PQPs for $96K/year spending.
• The discontinued Presidential Plus Card earns 500 PQPs for every $12K spent, up to 10,000 PQPs for $240K/year spending.
• You can earn up to 5,000 PQPs per calendar year from United cards, excluding earnings from Presidential Plus which don’t count towards the limit.
• Here is how many PQPs you need for status.
• You can also check for bonus PQP promotions here.

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:

• The AMEX Hilton Honors Business card offers a free annual night for spending $15K/year, another annual night for spending another $45K/year, and Diamond status for spending $40K/year.
• The AMEX Hilton Honors Surpass card offers a free annual night for spending $15K/year and Diamond status for spending $40K/year.
• The AMEX Hilton Honors Aspire card offers a 2nd free annual night for spending $60K/year.
• Spending on all Hilton cards count towards Elite tier qualification and Lifetime Diamond Status. Learn more about elite status here and lifetime diamond status here.
• Check if you’re targeted for another bonus night with $8,000 of spending here. 
  • I value Hilton points at about 0.45 cents each. You’ll need to determine how you value the free night and status benefits to determine if it’s worth putting tax payments on this card.

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!