Yes, you can pay federal and state taxes with a credit card, but a processor fee will be added to your bill
The IRS and most state tax agencies accept credit card payments through third-party processors. When you pay this way, the processor charges a fee — typically between 1.87% and 2.35% of your payment for federal taxes, depending on which processor you use. That fee is added to your total charge, so a $5,000 tax payment might cost you $5,094 to $5,118 in credit card charges.
The processors currently approved by the IRS are Paypal Credit, Worldpay, and ACI Payments. Each one has its own fee rate and website. State tax agencies often use different processors, so you will need to check your state's tax website to see which one handles credit card payments there.
Whether paying with a credit card makes financial sense depends on two things: whether the rewards you earn exceed the fee, and whether you can afford to pay off the balance when ready. If you cannot pay the card off in full when the bill arrives, the interest charges will quickly outweigh any rewards.
Key Takeaways
- Credit card payments to the IRS and state tax agencies go through third-party processors that charge 1.87% to 2.35% in fees.
- You will earn rewards on the full amount charged, including the fee itself, so a 2% cash-back card nets you roughly 0.13% to 0.13% after the processor fee.
- Paying with a credit card only makes sense if you can pay off the balance in full before interest charges begin.
- Debit cards, bank transfers, and direct debit from your checking account have no fees and are the lowest-cost payment methods.
- Each processor has its own website and fee rate, so compare them before you pay.
How the processor fee works and what it costs
When you choose to pay taxes with a credit card, you are not paying the IRS or your state directly. Instead, you pay a third-party processor, who then sends the money to the tax agency on your behalf. The processor charges a fee for this service, and you pay it as part of your credit card charge.
For federal taxes, the IRS-approved processors and their current fee rates are Paypal Credit (1.87%), Worldpay (1.87%), and ACI Payments (2.35%). These percentages are applied to your tax bill, not to your credit card limit. So if you owe $10,000 in taxes and use the 1.87% processor, you will be charged $10,187 on your credit card.
State tax agencies set their own fees and choose their own processors. Some states charge less than the federal rate; others charge more. A few states do not accept credit cards at all. You can find your state's processor and fee on your state tax agency's website, usually in a section labeled "payment methods" or "how to pay."
When credit card rewards might offset the fee
If your credit card earns cash back or points, you do earn rewards on the full amount charged, including the processor fee. A 2% cash-back card on a $10,000 tax payment would earn you $203.74 in rewards (2% of $10,187). If you used the 1.87% processor, your net cost would be $10,187 minus $203.74, or $9,983.26 — meaning you actually came out ahead by about $17.
However, this math only works if three conditions are met: your card's rewards rate is high enough to beat the fee, you can pay the full balance when the bill arrives, and you do not already have a balance on the card. If you carry a balance, the interest charges will erase any rewards benefit within days.
Most people are better off using a no-fee payment method. The IRS and all state tax agencies allow you to pay by bank transfer, direct debit from your checking account, or electronic federal tax payment system (EFTPS). None of these methods charge a fee, and none of them earn rewards — but they cost you nothing.
How to pay taxes with a credit card through an approved processor
For federal taxes, go to the IRS website and look for the "payment" section. You will see links to the three approved processors: Paypal Credit, Worldpay, and ACI Payments. Click the processor you choose, and you will be taken to their website to enter your payment details.
You will need your Social Security number or employer identification number, your tax year, and the amount you owe. The processor will ask you to enter your credit card information and confirm the fee. Once you submit, the processor sends the payment to the IRS, and you receive a confirmation number.
For state taxes, visit your state tax agency's website and find the payment methods page. Most states list their processor and a link to pay. Some states use the same processors as the IRS; others use different ones. The process is the same: you enter your information, confirm the fee, and receive a confirmation number.
Comparing credit card payments to other payment methods
| Payment Method | Fee | Processing Time | Best For |
|---|---|---|---|
| Credit card (processor) | 1.87% to 2.35% | 1 to 3 business days | High-reward cards only, if you can pay off when ready |
| Bank transfer or ACH debit | None | 1 to 3 business days | Most people; lowest cost |
| EFTPS (Electronic Federal Tax Payment System) | None | 1 business day | Recurring tax payments; requires enrollment |
| Check or money order | None | 7 to 10 business days | Rarely; slowest method |
Bank transfers and ACH debit are the fastest no-fee methods. You authorize the IRS or your state to pull money directly from your checking account, and the payment posts within one to three business days. You do not earn rewards, but you pay nothing.
EFTPS is the IRS's own payment system and requires you to enroll in advance. Once enrolled, you can schedule payments up to 120 days in the future, which is useful if you make quarterly estimated tax payments. There is no fee, and payments post within one business day.
What happens if you cannot pay the full balance when ready
If you use a credit card to pay taxes but cannot pay off the balance when the bill arrives, the interest charges will quickly exceed any rewards you earned. A $10,000 tax payment at 18% APR costs you $150 per month in interest alone. Even with a 2% cash-back reward, you would lose money within weeks.
If you cannot pay in full, do not use a credit card. Instead, contact the IRS or your state tax agency about a payment plan. The IRS offers installment agreements that let you pay over time with a setup fee (usually $31 to $225) and a monthly interest charge of about 0.5%. This is still expensive, but it is cheaper than credit card interest.
You can also request a short-term extension to pay. The IRS allows you to delay payment for up to 120 days without a formal agreement, though interest and penalties continue to accrue. Call the IRS at 1-800-829-1040 or visit your state tax agency's website to learn about your options.
Frequently Asked Questions
Do I have to pay the processor fee, or can I negotiate it?
The fee is set by the processor and the IRS or your state tax agency — you cannot negotiate it. However, you can choose which processor to use if your state or the IRS offers more than one. Compare the fee rates before you pay, and use the processor with the lowest fee.
Will paying taxes with a credit card hurt my credit score?
Paying taxes with a credit card will increase your credit card balance and your credit utilization ratio, which can temporarily lower your score. If you pay off the balance in full before the next billing cycle, the impact is usually minimal. If you carry the balance, your score may drop more noticeably.
Can I use a debit card to pay taxes?
No. The IRS and state tax agencies only accept credit cards, not debit cards, through their processors. You can pay with a debit card only if you use a bank transfer or ACH debit, which pulls money directly from your checking account with no fee.
What if I pay with a credit card and then get a refund?
If you overpaid your taxes and receive a refund, the IRS or your state will send the refund to you directly — not back to your credit card. You will still owe the processor fee on your original payment, even if you later received a refund. This is another reason to avoid credit card payments unless the rewards clearly justify the fee.
Can I use a business credit card to pay business taxes?
Yes. Business credit cards work the same way as personal cards — the processor fee applies, and you earn rewards on the full amount charged. The same math applies: only use a business card if the rewards exceed the fee and you can pay the balance in full when ready.