Can paying taxes lead to free flights?
It might sound surprising, but your tax bill can turn into rewards worth thousands of dollars with the right strategy.
In this week’s Letter, we’ll uncover how to maximize this opportunity, when it makes sense, and how to avoid common pitfalls.
The Basics: How It Works
Yes, you can pay taxes with a credit card—but there’s a catch.
The IRS lets you pay taxes through certain payment processors that charge fees ranging from 1.85% to 2%, meaning the rewards need to outweigh the costs.
When done strategically, paying taxes with a credit card can:
Help you hit high-value sign-up bonuses faster.
Unlock elite perks like lounge access and hotel upgrades.
Earn points at a low cost for premium redemptions like business-class flights.
When It Makes Sense
Here are the scenarios where this strategy pays off:
Sign-Up Bonuses
Credit cards often offer lucrative welcome bonuses—think 100,000+ points—if you meet a spending requirement. A tax bill can help you hit those thresholds easily.
Example:
Paying $15,000 in taxes with the Amex Business Platinum earns 150,000 Membership Rewards points, easily offsetting the fees.
Elite Perks
Premium cards like the Amex Business Platinum or Chase Sapphire Reserve offer premium perks, including:
Lounge access.
Hotel elite status.
Annual travel credits.
Discounted Points
Processing fees can essentially let you “buy” points at a discount, especially valuable for redemptions like first-class flights or luxury hotels.
When It Doesn’t Make Sense
This strategy isn’t always the right fit. Here’s when to steer clear:
Low rewards rate: If your card earns less than the processing fee (e.g., 1.5% cash back), you’ll lose money.
Carrying a balance: Interest charges quickly wipe out any rewards - only spend what you can pay off.
Tight cash flow: In this case, an IRS payment plan may be a better alternative.
Pro Tips to Maximize Rewards
Here’s how to turn your tax payment into extraordinary value:
Split Payments Across Cards
The IRS allows two payments per processor per year. Use this to hit multiple sign-up bonuses or annual spending thresholds across different cards.
Stack Promotions
Take advantage of seasonal promotions, such as bonus points via PayPal or extra rewards through shopping portals.
Check for Tax Deductibility
If you’re a business owner, credit card processing fees for tax payments may be deductible. Check with your tax advisor to confirm.
Real-Life Example: $30,000 Tax Bill → $10,000 in Travel
Here’s how one savvy entrepreneur turned a routine tax payment into premium travel:
Amex Business Platinum
Sign-Up Bonus: Earned 150,000 Membership Rewards points after spending $15,000.
Ongoing Rewards: Earned an additional 22,500 points (1.5x points for purchases over $5,000).
Total Points: 172,500.
Chase Ink Business Preferred
Sign-Up Bonus: Earned 100,000 Ultimate Rewards points after spending $8,000.
Ongoing Rewards: Earned 8,000 additional points.
Total Points: 108,000.
Grand Total: 280,500 transferable points.
Fees Paid:
$555 for Amex.
$333 for Chase.
Total Fees: $888.
Redemption Value:
The points were transferred to airline partners and redeemed for two business-class flights to Europe, valued at $10,000+. That’s a 1,025% ROI—turning an ordinary expense into an extraordinary experience.
Booking of the Week
Route: New York (JFK) → Paris (CDG)
Class:Air France Business Class
Cost: 120,000 FlyingBlue miles + $596
Savings: $4,000+ (Cash rate: $5,372)
The client transferred 100,000 Ultimate Rewards points to become 120,000 FlyingBlue miles (during a 20% transfer bonus).
Where and how you book matters.
To book your flights at the best rate, check out our Award Booking Service.
Key Takeaways
Paying taxes with a credit card can unlock significant rewards when done strategically.
Focus on high-value sign-up bonuses and elite perks for the best ROI.
Always calculate whether rewards outweigh fees before proceeding.
With the right strategy, even paying taxes can fund your next adventure.
If you’re a business owner looking to maximize and leverage, click here.
It’s time to make your money work smarter—and harder.
Ready to leverage your spending for extraordinary rewards?
Let’s get started.
Until next time,
Thank you,
Ade.