The IRS accepts credit card payments for taxes, but is that a smart move? Before putting your tax debt on plastic, consider the overall cost, the effect on your credit, and whether or not, there are better options. To help you decide, this post looks at these three factors:
- Processing fees – the IRS charges processing fees of around 2 to 3% for credit card payments.
- Interest rates – card rates vary, but the average rates are higher than IRS interest rates on unpaid debt.
- Available credit – if you don't have a savings account, you may need to save your available credit for emergencies.
Key takeaways
- You can pay IRS taxes online with a credit card.
- Processing fees and interest rates usually outweigh the benefits.
- Also consider the impact on your available credit and credit score.
- IRS payment plans generally offer lower interest rates than credit cards.
- If you can't afford your tax bill, use TaxCure to find a tax pro to help you.
Processing Fees
The IRS accepts credit cards through third-party companies that charge processing rates. As of 2025, these two companies process credit cards for tax payments at the following rates:
- Pay1040 – 1.75% for personal credit cards and 2.89% for commercial credit cards.
- ACI Payments, Inc. – 1.85% for personal credit cards and 2.95% for corporate credit cards.
Both Pay1040 and ACI Payments have a minimum fee of $2.50. For instance, let's say you pay $1000 with a credit card. The fees shake out as:
- $17.50 – personal credit card with Pay1040
- $18.50 – Personal credit card with ACI Payments
- $28.90 – commercial credit card with Pay1040
- $29.50 – corporate credit card with ACI Payments
If you're using a card just to get points, cash back, frequent flyer miles, or other rewards – compare your points to the processing rate to make sure that it's worth it. If you're getting 2% or 3% back and paying less than 2% in processing fees, you're making up the difference. But if you're only getting 1.5% in points and paying over 2% to process the payment, you're losing money. Keep in mind, however, that all of those gains are lost if you let the balance roll to the following month and incur interest
High Interest Rates
When you use a credit card to pay, you are effectively taking out a high-interest loan. If you pay off the balance immediately, no harm done – the same logic also applies if you pay off the balance before a 0% introductory rate expires. However, if the balance starts accruing interest and all you do is make the minimum payment, you could be paying your card down for years. As of 2025, the average interest rate on consumer credit cards is 28.7% according to Forbes. This rate fluctuates and in 2024, it was around 22%.
Look at how that works if you pay $10,000 in tax debt with a credit card that has 28.7% interest:
| Monthly Payment | Time to Pay Off | Total Interest Paid |
|---|---|---|
| $338.08 | 4 years, 4 months | $7,580 |
| $254.07 | 10 years | $20,488 |
| $239.99 | 20 years | $47,598.11 |
As you can see, the more you pay per month, the faster you pay off the balance, but even a slight decrease in your monthly payment can add a literal decade to your repayment schedule. And in all cases, the interest paid over the life of the credit card is shocking.
Often, the interest charged by the IRS for an installment plan is less than what you’ll pay on a credit card. Run the numbers. If you can’t pay off the credit card, it might not be worth it to use it for your taxes. For instance, as of the second quarter of 2025, the IRS interest rate is 7% and they also add a 0.25% failure-to-pay penalty to your balance monthly. See how that affects your repayment term and total interest paid, using the same monthly payments as above.
| Monthly Payment | Time to Pay Off | Total Interest Paid |
|---|---|---|
| $338.08 | 2 years, 9 months | $1049.89 |
| $254.07 | 3 years, 10 months | $1453.53 |
| $239.99 | 4 years, 1 month | $1554.83 |
As you can see, the same monthly payment at a drastically lower interest rate lets you pay off the loan much faster, with much lower interest. You could even make lower monthly payments if desired. The standard IRS installment agreement that you can set up online lets you make monthly payments for up to six years at the current interest rate – with a $10,000 tax debt at the IRS's current interest rate, you'd pay about $172 per month and incur roughly $2360 in interest over the lifetime of the payment plan.
Note that IRS interest rates adjust quarterly, but they're based on the Federal Short Term rate which credit card companies also tend to use. As a result, if the IRS interest rate goes up, credit card rates do as well. If you want to avoid the high interest rates of a credit card, consider an IRS installment agreement. If you cannot afford the minimum payment on an installment agreement, you may want to look into an offer in compromise or currently non-collectible status.
Available Credit
If you're one of the many Americans who doesn't have a savings account, you may want to keep your credit card open in case you face a financial emergency. Additionally, consider how using your card may affect your credit score – the credit bureaus base your credit score on several factors including credit usage. That refers to how much you owe compared to your total available balance.
For instance, if you have $50,000 in available credit across all of your cards and you owe a total of $25,000, your credit usage is 50%. From a personal finance standpoint, it's always best to not carry any credit card debt. However, from a credit score perspective, a lot of analysts say the sweet spot is around 25 to 30% utilization, and they also say it's better to have the balances spread between multiple cards than having one card maxed out while others have no balance due.
FAQs About Paying Taxes With Credit Cards
Now that we've outlined what to consider before paying your taxes with a credit card, let's look at some frequently asked questions about credit cards and tax payments.
Can you discharge credit card debt in bankruptcy if you used the card to pay taxes?
Probably not, but it depends. If you pay the taxes with a credit card and immediately file bankruptcy, that may fall under the fraudulent use rules – in bankruptcy, you are not allowed to write off debts that you never intended to pay. Also, tax debt is typically only dischargeable in bankruptcy if the debt is income taxes that are more than three years old. This rule basically transfers even when you put the taxes on a credit card – in other words, the bankruptcy court will look at whether or not the underlying debt was dischargeable when determining how to treat it in a bankruptcy case.
What if you pay taxes with a debit card?
The IRS also accepts debit cards, and the processing rates are lower than for credit cards. As of 2025, Pay1040 charges $2.15 for payments with personal/consumer debit cards and ACI Payments charges $2.10. Corporate and commercial debit cards incur the same processing fees as commercial/corporate credit cards.
Is there a better option than using a card to pay taxes?
If you already have the money in your bank account, skip the debit card processing fees and do a direct debit or ACH transfer out of your bank account. The IRS accepts these payments through Direct Pay and EFTPS. You can also pay with a bank transfer if you file your taxes online or have a tax pro e-file them.
Are credit card processing fees tax deductible?
Only, if the payment was for business taxes. Then, the fees are tax-deductible as a business expense. As a side note – you don't have to include credit card rewards as income – so that can be a nice way to almost "double dip" if you will. However, these fees are not deductible if incurred to pay individual taxes.
Does paying taxes with a credit card impact my credit score?
Possibly, if you carry a balance from month to month or if you miss monthly payments, then putting the taxes on your credit card could hurt your credit score. On the other hand, if you're trying to build up your credit score, it can be helpful to put expenses on the card and pay them off every month – but if that's your objective, you should consider a bill (for instance, a utility bill or groceries) that doesn't charge processing fees rather than paying federal taxes with your credit card.
Are there any benefits to paying taxes with a credit card?
In some rare cases, there may be benefits that outweigh the high interest rates and processing fees. For instance, say you're selling your business and you need to clear up taxes before the sale can move forward. If you don't have available cash, you may want to pay delinquent taxes with a card and then repay the credit card once you complete the sale of your business. Or if you need to stop a wage garnishment or an asset seizure but don't have the funds to pay in full, it may make sense to use a credit card, but in this situation, you should consult with a tax professional.
What if I can't afford to pay my taxes?
If you can't afford to pay your taxes, there are many options that you should consider before using a credit card. The most popular options are installment agreements (aka monthly payments), but there are also settlement options. And if possible, you should always use penalty abatement to reduce your balance due.
To get guidance on how to resolve your bank taxes, use TaxCure to find a tax professional to help you today. Our search feature lets you narrow down the options to find a tax pro with the experience you need. Then, you can review their profile, look at reviews, and reach out for free consultations until you find the right fit for your needs.