How to make (a little bit of) money paying your taxes

How to make (a little bit of) money paying your taxes

He wants YOU to save money!


While I realize this is at heart a travel blog, credit cards are an important part of not only how I accrue miles to travel, but also how I save money so that I have more to spend on travel.

With tax season approaching, I thought this might be an appropriate post.

Depending on your age, if you are lucky enough to owe the government money for your taxes, you likely either pay by writing a check, or doing an ACH debit from your checking account.

Generally, paying one’s taxes with a credit card is frowned upon, due to the fees charged.

But here’s the thing: As long as the percent cash back you earn on your card is higher than the percent that’s charged for paying your taxes with a credit card, you’ll come out ahead. You might even be able to use this strategy to meet minimum spending requirements on a card.

Right now, the cheapest rate for paying your federal taxes with a credit card is 1.87% (or $2.59, so you’ll want to make sure the payment is at least $138), charged by Therefore, you need a card that gets at least 2% back on all purchases to come out ahead.

For people just looking for something simple, the Citi Double Cash Card is a bit unique in that there is no signup bonus, but also no annual fee, and you earn 1% back when you make a purchase, and 1% back when you pay it off.

Other cards that offer 2% back when redeemed for travel purchases include the Capital One Venture and Barclays Arrival Plus World Elite.

Of course, getting 2% cash back on a payment that is charging 1.87% extra only yields a net cash back of .13%, or, $1.30 for every $1,000, which isn’t really much, though it can be useful if you’re trying to meet a minimum spending bonus, or if you’re waiting on money to transfer into your checking account.

UPDATED 3/11: The new kid on the block

If you haven’t at least heard about the Chase Sapphire Reserve by now, then I do wonder if you’ve been living under a rock, given that it was so popular that Chase ran out of metal cards and lost $300 million on it. But you shouldn’t use it to pay your taxes. It gets 1x back on all purchases that aren’t dining or travel, and those points are multiplied by 1.5 cents per point when redeeming for airfare. So if you redeem for airfare, you’ll still come out behind .37% (1.5-1.87).

But here’s where it gets interesting. Having the Reserve means that the value of your Ultimate Rewards points will get multiplied by 1.5 no matter how you earn them. This is where the Chase Freedom Unlimited comes into play. The Chase Freedom Unlimited is a good card for “everything else” purchases, as it earns a flat 1.5x back on everything.

See where I’m heading here? If you pay your taxes with a Chase Freedom Unlimited, you’ll get 1.5x back, which means you’ll be at a loss, but once those get multiplied by the 1.5 from the Reserve when redeeming for airfare, that means you’re getting 2.25% back (assuming that you redeem for airfare), or .38%. Now again, this isn’t a ton ($3.80 for every $1,000), but it’s something.

So can we do even better? Maybe a 3% card? Yes. Well, kinda.

The Discover It Miles card is another unique card, in that there is no signup bonus or annual fee, and it offers you 1.5% cash back on all your purchases, but doubles your rewards your first year, in other words, giving you 3%. Therefore, if you were to time the opening of your card and payment of your federal taxes, you could use this card to get 3% back on your federal taxes twice (e.g. open the card March 1, pay your federal taxes for the current year on March 15, and then pay your taxes for the next year on February 15). This will now boost you up to a net of 1.13% cash back, or $11.30 for every $1,000. It’s not a ton of money, but it’s a little bit more (and personally, with all the independent consulting work I did last year, I know I’ll be paying more than that in taxes).

The Discover It Miles card is also just a great all-around card to have, namely in that it not only has no annual fee, but also no foreign transaction fees, and up to $30 in in-flight WiFi credit every year, on any airline. (Of course, there is tremendous irony in Discover trying to market a card to be used abroad, given how much trouble they have with acceptance in the US*).

And while I don’t have time to go through the credit card fees for state tax rates, I know that California’s is 2.3%, so if you want to make any money from paying your California state taxes, the Discover It Miles card is your only choice.


Happy filing!


Did I miss something? Have questions? Feel free to e-mail me or post in the comments below.


*I really wanted to instead link to the Futurama clip about Discover, but could not find a video of this anywhere on the internet without paying. If you have a link to this scene, please let me know and I’ll replace the Family Guy link.




3 thoughts on “How to make (a little bit of) money paying your taxes

  1. Thanks for the post! My takeaway was more about the credit cards for international travel. That Discover It card has the features I was looking for! I couldn’t find a no foreign transaction fee WITH no annual fee…and cash back, even better! I’m just wondering have you used a Discover card and found that it is accepted abroad?!


    1. In short, no. I would recommend the bank of america travel rewards card, which has no annual fee, no foreign transaction fees, 1.5% cash back on everything, a $200 signup bonus, and runs on the VISA network


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