Earn miles & points by paying taxes & insurance using credit cards
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Do you have property taxes due? Or perhaps, income taxes due? If you owe money to Uncle Sam or to your local government, your typical payment options are:
- send in a check; or
- set up some kind of payment plan in case you can’t pay in full; or
- pay your taxes via credit card or debit card;
- or via Paypal (wherever available)
I surveyed members of my Daddy Travels Miles & Points Facebook Group Page, I asked them how they intend to pay their taxes. This was how they responded.
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56.8% – have an impound account, therefore the taxes are part of your monthly mortgage payment, and your mortgage company sends a payment on your behalf
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13.5% – will be paying their property taxes directly by sending a check or via debit card
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29.7% – will be using existing credit card or signing up for a credit card to earn points or cash back along the way
Is there really a wrong or right way of doing this?
- No choice when mortgage was set-up other than having an impound account
- Didn’t realize they could request to pay for their property tax separately
- For peace of mind, would rather not deal with a big property tax payment
These are all very valid reasons. In fact, for the longest time, I, too, had an impound account. I didn’t want to have to worry about setting aside a big chunk of money come tax season.
What? You could pay property taxes separately?
Depending on how your mortgage was set up, you may have the option to request to pay your property taxes separately. You’d need to call your mortgage company directly to request this. Some banks might have specific requirements to qualify for this such as amount owed vs the value of the home. That should be your first step, call and ask your bank.
If you have an impound or mortgage escrow account
The good news with impound account
Why we do NOT have an impound/escrow account
To cancel your impound account
Can you also pay for your homeowner’s insurance separately
Is it worth it to pay the fees charged when you pay your taxes with a credit card?
Let’s do the math
Earn miles & points by paying taxes & insurance using credit cards
Let’s say you applied for a Chase Sapphire Preferred. You have to look at what this card requires you to do to get the bonus.
- Spend $4,000 in purchases with 3 months of opening the card
- $95 annual fee
- Earn 60,000 bonus (this bonus may vary depending on the current offer)
- $50 statement credit when you book a hotel using Chase Travel Portal
The 60,000 bonus points alone are worth $750 when you book directly with Chase. So right there, your $80 investment gives you an easy return of $750. Wait, what about the $95 annual fee? That’s easily offset by the $750 and the $50 statement credit when you book a hotel with Chase. And to those who transfer these points to travel partners, your points value from your redemptions could even go beyond $750.
What if you DO NOT pay with a credit card?
What about using my existing credit card?
This could still work if you have an existing credit card that will reward you at least 1 point per dollar when you pay your taxes with a credit card. Let’s say you have an existing credit cards that earns 1x per dollar. Here’s a side by side comparison. For this sample, and just to keep it simple:
- New credit card = Chase Sapphire Preferred with a 60,000 sign up bonus, $4,000 minimum spend, earns 1x per dollar on all other purchases
- Existing credit card = no sign up bonus, no required minimum spend, earns 1x per dollar on all other purchases
If you are disciplined enough to set money aside for taxes
Just remember
If you were planning to pay for your taxes directly out of your checking account, and decide to pay with a credit card, just make sure to stick with your plan and pay your credit card bill in full and on time.
Plan early
If this is a strategy that you want to choose moving forward, you might want to plan and consider applying for new credit cards BEFORE your taxes are due. So I would consider applying for cards in Feb/March in preparation for paying your taxes due the following month. You could pace yourself, get a new card with lucrative sign-up bonus and easily meet the spend when paying with credit card.
For a list of over 60 credit cards, click here.
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Editorial Disclosure: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.