Not everyone is lucky enough to get an income tax refund.
If you’re one of the unfortunate souls left owing Uncle Sam a chunk of your bank account, then I’m betting you took one look at the amount you owe and said, “I could really use a vacation right about now…”
A vacation, you say? No problem. You probably thought a vacation was out of the question since you had to be a responsible citizen and pay a tax bill instead. But we know exactly how you can turn your tax bill into a relaxing getaway, no joke, and no fairy godmothers required.
At BradsDeals, we’re pretty big on using credit card rewards to travel. And guess what? Paying your taxes with a rewards-bearing credit card can earn you some serious travel benefits. Let’s take a look at a few of the offers out there right now.
If your tax bill is $500…
Spend $500 in the first three months with your American Express Gold Delta Skymiles Card and you’ll net 30,000 Delta Skymiles – enough to cover a round trip domestic flight in economy class. Cardholders also get Delta perks like one free checked bag per flight, priority boarding and 20% off in-flight purchases.
If your tax bill is $1,000…
Grab a Citi Platinum AAdvantage Visa and you’ll get 30,000 AAdvantage miles when you spend $1,000 in the first three months. The threshold is higher than with Delta, but since American is part of the One World network, their miles can be used on a dizzying number of international partner airlines. For example, your 30,000 AAdvantage miles can be converted to 15,000 British Airways Avios – a real plus if you took advantage of the British Airways Chase Visa offer earlier this year.
If your tax bill is $2,000…
Split your payment between two cards. Put $1,000 on the Citi Platinum AAdvantage Visa to get the 30,000 AAdvantage miles mentioned above, and the other $1,000 on the Citi Hilton HHonors Visa Signature Card for a reward of 40,000 HHonors Bonus points worth 5 free nights at any category 1 Hilton property. Your flight and hotel are both covered. Voila, you’ve got five days on the beach in sunny San Diego!
Alternatively, you can convert those 40,000 HHonors Bonus points to 6,000 AAdvantage miles, for a grand total of 36,000 AAdvantage miles.
If your tax bill is $3,000…
Our card of choice for a tax bill in this range is the Chase Sapphire Preferred Card. Spend $3,000 within 3 months of signing up and you’ll receive 40,000 points for signing up, plus 1 point per dollar charged for a grand total of 43,000 points. Not bad. What makes this card truly worth your while, though, is that Chase Ultimate Rewards points transfer 1:1 to a number of popular airlines and hotels, including Marriott Rewards, Ritz-Carlton, Hyatt Gold Passport, MileagePlus United, Southwest Rapid Rewards, and one of our favorites, British Airways Executive Club. If you’re stocked up on air miles already, we recommend transferring these to Hyatt, where a night in a $1,000 room at a Park Hyatt is just 22,000 points.
If your tax bill is $4,000…
We found two attractive options for those with tax bills that are $4,000 or higher.
Option A: 58,000 Avios
Split your bill – $1,000 on the Citi Platinum AAdvantage Visa and $3,000 on the Chase Sapphire Preferred Card. That will get you 30,000 AAdvantage miles and 43,000 Chase Ultimate Rewards Points. Now transfer both of those to your British Airways Executive Club account for a grand total of 58,000 Avios, which is enough to get you to Europe and back.
Option B: 43,000 Avios and 5 Nights in a Hilton
Once again, you’ll need to split your tax payment between two cards, this time the Chase Sapphire Preferred Card and the Citi Hilton HHonors Visa Signature Card. Convert your 43,000 Chase Ultimate Rewards points to Avios (or transfer to the airline of your choice) and use your 40,000 HHonors Bonus Points for 5 nights at a category 1 Hilton property, 1 night at a category 6 property, or something in between. This option should cover most of your airfare to Europe, plus give you a place to stay once you’re there.
How to Pay Your Federal Tax Bill Online with a Credit Card
Now that you’ve plotted your well-deserved escape, how can you actually pay your taxes with a credit card? The IRS has an entire page devoted to the subject, but the best options appear to be ChoicePay or PayUSAtax. Of all of the credit card payment processors, these two have the lowest credit card processing fees, 1.88% and 1.89%, respectively. ChoicePay accepts Mastercard and Visa, and PayUSAtax accepts just about anything you can think of. Keep in mind that 1.88% of a $2,000 tax bill is $37.60, so the fees can be steep if you’re not getting rewards out of your credit cards that more than make up for it. On the other hand, if you have a debit card with a rewards program, you can use that for a flat charge under $4 regardless of the amount.
Even if none of these specific deals will work for you, chances are good that you’ve got at least one rewards credit card in your wallet right now. The point here is that you can get something back from paying your taxes if you use those rewards creatively. Good luck!
An important caveat:
Paying your taxes with a credit card is not a great option if you can’t pay off the balance right away. This system works best if you already have the cash set aside and can apply it to your card immediately to avoid racking up interest charges. Let’s face it, credit card debt is ugly, and paying interest on top of taxes is even worse. But if you can pay it off right away, why not get a little something for being a good American taxpayer? We think you deserve it.
Photo Credit: arol.vinolas via Flickr. Some rights reserved.
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