tl;dr

• This post is about the logistics of paying large (10s to 100s of thousands) tax bills with a credit card, to earn cash back and sign up bonuses.
• First, make sure to estimate if you have a large tax bill coming. If you are paid in stock, it’s common to owe a tax bill at the end of the year. If the value of your company’s stock went up relative to last year, your tax bill might have gone up too.
• Second, make a plan to pull together the cash you need, via stock vests, bonuses, state tax refunds, dividends, or loans. All those options have failure modes, so make sure to have a backup plan too.
• Finally, figure out the credit card(s) that will be profitable for you to use. You can then maximize the portion of your tax bill you can put on those cards by increasing your credit limit, as well as splitting payments across statements, cards, and payment processors.
• As an example, there are lower and higher effort ways to tackle a $115k tax bill:
  • With a few hours of effort, you can put together a setup that will make $1,360 ($544 / hour) by paying most of the tax bill on credit. As a bonus, this setup only takes minutes to make a similar profit if you use it to pay your future estimated and annual tax payments.
  • With more effort, you can make $4,382 ($974 / hour) by getting sign up bonuses and paying the full tax bill on credit. The down side of this setup is that it requires a similar amount of effort to earn the same return on future tax payments.

Intro

The goal of this post is to explain how you can pay large tax bills (think five figure, into the low six figure) with credit cards. Why would you want to do that? Because credit cards can earn sign up bonuses and cash back far in excess of the fees associated with paying your taxes with a credit card.

This post is not about how to pay your taxes with a credit card more generally. There are already great resources about that on Frequent Miler and Doctor of Credit. Those posts are more comprehensive than this one, and will be more up to date on the details that change from time to time (eg. fees change every tax season and payment providers come and go). Those posts aren’t required reading to understand this post, but you should probably read them before actually paying your taxes; there’s a lot of good info in there!

Know if you Have a Big Tax Bill Coming (Many Tech Workers Will!)

There are many ways to end up with a large tax bill. For the tech workers in my audience, that reason is almost always the same: the federal government allows companies to withhold tax on their stock-based compensation at the 22% supplemental withholding rate, rather than at your federal income tax rate (which is likely above 22%). This lower withholding rate doesn’t actually lower what you owe come tax time, it just lowers how much stock is sold on your behalf to pay taxes. Unfortunately, this difference between taxes withheld vs taxes owed often leads to a surprise tax bill¹.

Even if you don’t think you’ll have a huge tax bill this year, you should do some quick estimations to be sure. The reason is twofold:

1. 2024 was a good year for a lot of companies that give stock-based compensation. For example, Meta was up 70% for the year. If you work at Meta, received RSUs, and had to pay the IRS a little bit last year, you might have a much larger payment due this year. 
2. Large dollar amounts take time to pull together. It might be easy to just pull a few hundred or a few thousand from your checking account to pay your tax bill, but hopefully you don’t just have tens or hundreds of thousands in cash sitting around (if you do, you should probably invest that).

Luckily, it’s pretty easy to estimate your tax bill. Just download TurboTax (or your preferred tax software) now, and punch in your W2². You almost certainly don’t have all your 1099s and other tax forms by now, but you can punch in last year’s numbers as estimates. This will be a ballpark number to decide just how much money you need to be able to pull together.

Don’t forget that your first estimated taxes for 2025 are also due on April 15! You’ll want to plan to be able to pay that, and you’ll need to account for the fact that if your 2024 tax bill went up, there’s a good chance your estimated taxes for 2025 will be higher too. Check out this post for more discussion of figuring out your estimated taxes.

Pulling Together the Money

Before planning to rack up five to six figures of credit card debt, you’re going to want to make sure you have a plan for how to pay that debt off. Here are a few good ideas I’ve done, or seen my friends do:

• Already have the money: Maybe you planned ahead and have been putting aside money in a safe investment vehicle like a high yield saving account, money market, or treasuries. If so, great! Proceed to the next section.
• Selling your next stock vest: If you’ve got a large enough tranche of stock vesting between now and April 15, and you’re able to sell it to get money for your taxes, that can work too. Just remember that the value could be significantly lower by the time you’re able to sell (or you could lose your job before it arrives), so make sure to have a backup plan. Also remember that 2025 taxes will be taken out of that vest, so don’t count on having the full amount.
• Using your bonus: Just like stock vests, if you’ve got a bonus coming before April 15, you could use that to pay your taxes. Also like stock vests, the same caveats apply about having a backup plan and making sure you account for the taxes that will come out of it. Note that bonuses are sometimes withheld³ at a higher income tax rate vs the 22% supplemental income tax rate⁴, so assume you’ll lose more than 50% of your bonus to taxes .
• Using your state tax refund: Some states, like New York, have more punitive withholding rules for supplemental income. Those rules can result in over-withholding, and you may end up with a large state tax refund. If you’re in this boat (which the estimation process from the previous section should help you determine), you can file your taxes as early as possible to get that state tax refund⁵. You can then use it to pay your federal taxes come April 15. Note that there’s no guarantee your state tax refund will come in in time, so have a backup plan. For me personally, I often find that my state tax refund ends up being close to what I owe federally, so I often end up taking this option.
• Using your dividends: Many stock portfolios pay dividends on a regular cadence. If your portfolio has a history of paying dividends and will pay out between now and April 15, you may be able to divert your next quarterly payment towards taxes rather than reinvestment. Just remember that big shocks can cause companies to cut dividends, so make sure you can handle dividends being lower than you expected. 

If you aren’t able to use any of those more-ideal options –or you’re making a backup plan as I suggested– here are a few less-ideal options:

• Use a Pledged Asset Line (PAL) or Other Loan: I’ve written previously about how I used a PAL to get a loan against my investment account. If you have access to a PAL, HELOC, PLOC, or any other easy and reasonably priced loan vehicle, you can potentially use that to get the money you need. If you’re going down this route, make sure you know the limits on what you can withdraw, the rate you’ll be paying, and the risks of the bank calling your loan and forcing you to repay it. Also make sure to pull out the money a bit early, in case there are any hiccups.
• Use a 0% Credit Card: I’ve also previously written about this trick. The basic idea is that you can apply for a credit card with a 0% promotional APR, and then transfer your credit limits from other cards to that one to get a large loan for free. Make sure to read the section of my original post where I covered this concept, as well as my more recent post where I described it’s high opportunity cost

Regardless of how you pull together the money, you can give yourself a little extra boost by storing it where it will earn a high interest rate up until the moment you use it to pay your credit card. For example, I use this setup to invest in money market funds in my checking account, and auto-sell them when my bills are debited from the account.

Paying With a Credit Card

How to Pay the IRS

The Frequent Miler and Doctor of Credit posts I shared in the intro will give you a fuller overview, but your basic options are:

1. Pay via one of the IRS’s authorized credit card payment processors. The cheapest rates are a 1.75% fee for credit, and a $2.10 fee for debit.
   • Make sure to use the rate check tools (ACI Payments, Pay1040) check the rates for the exact cards you plan to use, because they are not universal. For example, Pay1040 (the provider that offers that 1.75% rate) charges an elevated 2.89% for Amex cards and business cards, and ACI Payments charges 2.95% for business cards. You can sometimes get around fees like this by obscuring the fact you’re using a business card, say, by paying via PayPal or Venmo (but check those rates too!). If you go the PayPal route, make sure the card you want to charge is the only card in your PayPal account; PayPal has a nasty habit of picking a random other card to charge if the payment doesn’t go through on your chosen card!
2. Pay via check, using a service like Plastiq or Melio. These services bill your credit card and charge you a 2.9% fee, and mail the check on your behalf.

Note that these fees are current as of the writing of this post, but do change somewhat frequently. Check the links for the latest info.

Getting the Right Card(s)

Obviously, you need a card that will earn more than the fees to make this worthwhile. If you’ve got access to a cash back debit card, that fixed fee looks quite attractive. One year, I used the Nearside debit card to get 2.2%, and only paid a fixed $2 fee. These days, unfortunately, the only cash back debit cards I’m aware of are more niche and invite only, so I won’t be pitching this route to a broader audience.

Assuming you’ll be paying by credit card, you’ll need a card that either has a per-dollar earning rate that’s higher than the 1.75% fee, or one that pays out a sign up bonus that will counteract the fee. If you already have a credit card that earns more than 1.75% (eg. Citi Double Cash, which earns 2%), then you could use that. Just make sure to consider the opportunity cost; an extra 1% on a $50,000 tax payment is $500!

If you’re considering going the route of getting a card with a higher per-dollar earning rate, here are some of the best options I see (note: none are referral / affiliate links):

• US Bank Smartly (4%): Earns 4% everywhere, making it the best earning all-around cash back card I know of right now. Note that to get the full 4%, you will need to move some assets to US Bank. This card also has no annual fee.
  • UPDATE: There are reports this card may be discontinued, and people who were recently approved for this card (including myself) have all been getting $500 limits and failing to get an increase when requesting one. For those reasons, I no longer recommend this card.
• PayPal Mastercard (3%): Earns 3% when paying via PayPal, which both IRS payment processors support. This is the option I’ve used to make my estimated tax payments this past year. This card also has no annual fee.
• Check this list for other good cash back options that will earn more than the 1.75% fee.

If you’re considering going the sign up bonus route, it’s probably impractical to get a dozen credit cards with sign up bonuses that require only a few thousand dollars in credit card spend. Luckily, there are cards with larger spend requirements (and larger bonuses). Many do tend to be business cards, but don’t let that scare you off. Some examples of cards with high spend requirements and bonuses right now are (note: no referral / affiliate links):

• American Express Business Platinum: It has a bonus of 250,000 points for $20,000 of spend. It also earns 1.5% back on purchases of $5k or more. If you pay $20,000 in taxes on this card, you’ll end up with 280,000 points, redeemable for $2,800. Netting out the $695 annual fee, that works out to $2,105 in profit.
• American Express Business Gold: 200,000 points, for $15,000 of spend. It also earns 1% back on tax payments. If you pay $15,000 in taxes on this card, you’ll end up with 215,000 points, redeemable for $2,150 (if you have a Business Platinum card or one of the other $0.01 / point cash out options). Netting out the $375 annual fee, that works out to $1,775 in profit.
• Capital One Spark Cash Plus: $2,000 cash for $30,000 of spend. It also earns 2% back on tax payments. If you pay $30,000 in taxes on this card, you’ll end up with $2,600. Netting out the $150 annual fee, that works out to $2,450 in profit.
• Check this list for other good sign up bonus options

Before you decide which card(s) to get, read through the next section to figure out how you’ll make your very large tax payments within the constraints of your credit limits.

Paying a Tax Bill Larger than your Credit Limit

If you have a large tax bill (the whole point of this post!) it’s probably larger than any one credit card’s credit limit. If it’s not, congratulations, you get out of class early; you can skip this section. The rest of us need some workarounds.

The first workaround is simple: increase the amount you can put on your card. There are a few ways to do this:

• Request a Credit Limit Increase: You can just call / message your bank, and ask them to increase your credit limit. You can find a short guide per-bank here, including on which banks do a hard pull of your credit report when deciding your request. Note that some banks like US Bank will be willing to increase your credit limit even if you just got the card!
  • A note on Amex Charge Cards: Some of the most popular Amex cards are “Charge Cards,” which don’t actually have an explicit credit limit. But Amex, of course, does have a limit on how much they’re willing to let you borrow from them at one time. You can figure out how much you can put on your card at one time by using the Check Your Spending Power feature. I’ve often been pleasantly surprised that they’re willing to let me go into the tens of thousands. One warning: If you get an instant card number for your new card, some people have reported that instant card numbers have their own limits (one reader reported a $15k limit; you can ask an Amex chat rep what yours is), which will not be reflected in the Check Your Spending Power feature.
• Consolidate Your Credit Lines: If the bank isn’t willing to increase your credit limit, they may be willing to move your credit limit from one card to another. For example, I once consolidated limits across a half dozen cards to get a $43k credit limit on a new Chase card.
• [CAUTION] Pre-paying / “Cycling” Your Card: This entails making a credit card payment to move your balance negative, enabling you to make a purchase larger than your credit limit. Another version of this is using up your full credit limit, paying down your card, and then using some or all of your credit limit again in the same statement cycle. While this can work, banks tend to frown on this behaviour and are known to shut down accounts for it. For example, Synchrony (the issuer of the PayPal card) will aggressively lock or entirely close your account if you do this. Business cards tend to be more friendly to cycling, so you may be able to get away with this on the Amex Business cards described in the previous sections. In general, if you don’t know that your particular card is friendly to cycling your credit limit, avoid doing it.
• Split Payments Across Statements: If you have a $10k credit limit on the card you want to use to pay your taxes, you could make $20k in payments with that card by paying $10k in March and then another $10k in April⁶.
  • I normally advocate against paying the government any earlier than you have to, so one extra little trick you can do is adjust your statement close date. For example, you could adjust your statement close to be on the 13th of the month, paying $10k to the government on April 9th (leaving a few days buffer for the charges to fully post). You could then immediately pay the $10k off on the same day (note that this is not “cycling” as described above, so long as you don’t cumulatively spend and pay off more than your credit limit over the whole statement). Come April 14th, you’ll be in a new statement cycle and can make another $10k payment⁷. This lets you squeeze two full credit limit’s worth of payments into just a few days, without cycling.
• Split Payments Across Cards: If you’re not going to be able to get everything that you owe onto one card, you can always use multiple cards. If you’re applying for new cards to do this, make sure you plan to stick within each bank’s rules on how many new cards you can get in a certain time period. For example, Amex only lets you get the exact same card once every 90 day period, so you can’t just go for the Business Gold card twice.

Some of the above techniques rely on being able to split your tax payments across multiple credit card transactions. You’ve got a few options for doing this:

• Split Across Processors: Each of the IRS’s two payment processors will let you make two payments, for a total of 4 payments.
• Split Across You and Your Partner: There is a (finicky) way to make payments in you and your partner’s name, if married and filing jointly. Since each of you can make 4 payments, this brings your total to 8.
• Split By Sending Checks: You can send unlimited credit card payments using the more expensive pay-via-check option I described above.
• Pay Only a Subset on Credit Cards: You don’t have to pay your whole tax bill by credit card. If you max out on all the ways you can / want to pay by card, it’s always fine to send the remainder other ways (eg. pay from your bank for free). Paying half your taxes by credit card is still more profitable than paying none!

If Something Goes Wrong

Since originally posting this, I’ve received a number of reports of issues people have had, including:

1. Forgetting to wrap Amex cards in PayPal, resulting in the higher 2.89% fee.
2. Trying to make a $20k payment via PayPal using an Amex instant card number, hitting an undisclosed $15k limit on instant card numbers, and having PayPal fall back to charging the wrong card.

If something like this happens to you, you might be able to get ACI or Pay1040 to refund your payment if you contact them right away! One reader was successfully able to get their payment cancelled via email, though I recommend calling given the time sensitive nature.

Worked Example: $115k Tax Bill = $1,360-$4,382 Profit

Let’s assume a theoretical taxpayer has:

• A  $100,000 tax bill, due April 15.
• A $15,000 estimated tax payment, also due April 15.
• A PayPal 3% back card, with a $10,000 credit limit.

They have many possible options, but here I’ll outline two: a lower effort but lower profit one, and a higher effort higher profit one.

Lower Effort: Put what you can on a cash back card

To minimize the effort for this tax payment, and also build a very sustainable / easy way to profit on future estimated and annual tax payments, our taxpayer could:

1. Maximize their PayPal card credit limit
   1. Call Synchrony (the issuer for the PayPal card) and increase their credit limit to $20,000⁸. They can also change their due date to the 13th of the month while on the line. Note that you can do a Synchrony credit limit increase every ~6 months.
2. Get a Smartly card, and maximize their credit limit
   1. UPDATE: There are reports this card may be discontinued, and people who were recently approved for this card (including myself) have all been getting $500 limits and failing to get an increase when requesting one. For those reasons, I no longer recommend this card. I have not changed the rest of the example, but I recommend you instead go for a 3% back card instead of the Smartly card.
   2. Apply for a US Bank Smartly card⁹, which we’ll assume has an initial limit of $10k.
   3. Call US Bank and increase their credit limit to $20,000 (you can do this right away!). Also change the due date to the 13th of the month while on the line.
   4. Transfer $100k in investments (including IRAs) to US Bank to get the full 4%.

It’s advisable to start this process ASAP, since getting the cards and getting the assets transferred to US Bank can take a while.

Then, to pay their taxes, our taxpayer could:

1. April 9th:
   1. Make a $20k payment through ACI Payments with their PayPal card (via the PayPal checkout feature, to qualify for the 3%!), earning 3% and paying 1.85%. This gives a total profit of $20,000 * (0.03 – 0.0185) = $230
      • Note that you need to use ACI Payments for the PayPal card; Pay1040 charges 2.89% to use PayPal.
   2. Make a $20k payment through Pay1040 with their US Bank Smartly Card, earning 4% back and paying 1.75%. This gives a total profit of $20,000 * (0.04 – 0.0175) = $450
   3. Pay off both the PayPal and Smartly cards. Note that we’re doing this a few days early, so that the payment has time to clear.
2. April 14th:
   1. Make the same payments with the PayPal and Smartly cards again, for another $230 and $450.
   2. Pay the remaining $20k of the tax bill and $15k of estimated taxes through the IRS’s Direct Pay system for $0.

Cumulatively, our theoretical tax payer was able to put $80k of their $115k in taxes on credit cards, for a profit of $230 * 2 + $450 * 2 = $1,360. I’d guess this takes ~2.5 hours to set up, for a profit of $544 / hour, which is within the $200 / hour rule. And the great thing is that once set up, this cash back setup can be used for future estimated tax payments / annual tax payments, with near zero marginal time vs. paying via Direct Pay.

Higher Effort: Get sign up bonuses and put everything on credit

If our theoretical tax payer was an optimizer (like me) and wanted to get even more out of their tax payment, they could add on the following step:

3. Apply for both the Amex Business Gold and Amex Business Platinum cards described above.
   • I’d recommend doing this after getting the US Bank card. Amex is very lax with their approvals and is less likely to be sensitive to the US Bank hard pull on your credit report than vice versa.

Then, in addition to the credit card payments described in the previous section, they could:

3. April 6th¹⁰:
   1. Make a $20k payment (assuming that they’ve checked that their Spending Power supports this¹¹) through Plastiq with their Amex Business Platinum card. This will round out what they owe for their annual taxes. The Plastiq fee is 2.9%, adding up to $580. Subtracting that from the $2,105 in profit calculated above, this transaction nets out to a final profit of $1,525.
   2. Pay off the Platinum card immediately. This is to a) ensure there won’t be $15k in outstanding charges on the Gold card when Amex is deciding whether to approve the upcoming $20k in charges on the Platinum card, and b) show Amex a track record of paying off large charges.
4. April 14th:
   1. Make the $15k estimated tax payment (again, assuming Spending Power supports this) through ACI Payments (via PayPal, to avoid the marked up business card fees) in the 1040ES category with their Amex Business Gold card. The ACI fee is 1.85%, adding up to $277. Subtracting that from the $1,775 in profit calculated above, this transaction nets out to a final profit of $1,497.
   2. Paying off this card early is optional, but not strictly required.

Cumulatively, our theoretical tax payer was able to put the full $115,000 in taxes on credit cards, for a profit of $1,360 + $1,525 + $1,497 = $4,382. I’d guess that this adds another ~2 hours of effort on top of the original 2.5 hour estimate, for a profit of $974 / hour. A major downside of this approach, however, is that if you want to maintain this higher ROI on future tax payments, you need to keep getting sign up bonuses. That means you never converge to the near-zero marginal time for profitable tax payments that the lower effort solution above offers.

Is it worth your effort to do this? Maybe. It depends on how much you enjoy / hate the process. I love optimizing things like this, but not everyone does. Regardless of where you fall on that spectrum, this is objectively not the highest value financial optimization you can do, in absolute of dollars / hour terms, so make sure you’re focusing on higher value optimizations first.

Thanks

Special thanks to Jeffry Dunn for giving feedback on this one from his own experiences and observations. The feedback really transformed and improved this post!

1. Being surprised by your tax bill is a bad thing, but having a tax bill can actually be a good thing, because it offers you an opportunity to invest your money and earn income on it in the time between when you earn it and when you pay your taxes. Just make sure you have paid enough of your taxes to not owe a penalty (unless you’re intentionally choosing to pay the penalty, that is). ↩︎
2. You should already have your W2 by now, given that the deadline to distribute is January 31st. But if you don’t have it, you can guestimate it using the numbers from your last paycheck of the year. ↩︎
3. Note that I said withheld, not taxed. Your bonus is income, just like your regular salary, and at the end of the year you only owe regular old income tax on it. See the next footnote for why bonuses get extra withholding, but just know that despite that extra withholding, your bonus isn’t actually taxed at a higher rate. ↩︎
4. The short version of this (with a full length post in the works to more fully explain) is that employers that tax your bonus at the higher rate are using an alternative tax scheme where they put your bonus into a regular paycheck and calculate taxes on it as if it’s your regular income. The problem with doing that is that the IRS worksheet for calculating taxes on a paycheck in automated payroll systems basically amounts to “multiply the amount in this paycheck by the number of pay periods, calculate the amount of tax owed on that annual income, divide that tax by the number of pay periods.” So if you have a $50k bonus, and a bi-weekly pay schedule, your taxes withheld will be calculated as if you are making $50k * 26 = $1.3 million / year, pushing you up into the top tax bracket. But don’t worry, this dumb calculation doesn’t actually increase your taxes owed (see the previous footnote). ↩︎
5. If you look at Page 3 of this PDF, you can see that New York withholds taxes on supplemental income (eg. RSUs and bonuses) at 11.7%. That is higher than the top income tax bracket of 10.9% (which only kicks in at $25M in income!), and much higher than the <=6.85% rates that folks earning under $1M are subject to. The net result is that –baring other situations that cause you to have under-withheld state taxes– folks receiving supplemental income in New York State are almost always going to have a state tax refund coming their way. ↩︎
6. You could of course also make a payment even earlier in February if you wanted. You might not have all your tax forms and your taxes done by then, but just having your W2 should allow you to ballpark what you owe. If Turbotax is guessing you owe $50k just based off of your W2, it’s probably safe to make a pre-emptive $10k payment before you know the exact amount. ↩︎
7. As an added bonus, you’ll also have another 30+ days before you have to pay off that second $10k payment. At a 4% interest rate, that’s only $33, but hey if I saw $33 on the sidewalk I’d pick it up! If you can scale this up to floating $100k for 30 days, all of a sudden you’re talking about $330, which is a respectable return. ↩︎
8. Synchrony tends to be willing to double credit limits every ~6 months. When requesting a limit increase online, I got stuck at a $20k limit. Others, however, have been able to get to $40-50k limits, with seemingly better luck over the phone. ↩︎
9. When you look at the calculations in the “higher effort” section, you may notice that the earnings from the Smartly card come in at less than half the value of the Amex cards. It’s reasonable to question whether getting the Smartly card is actually the right choice. In response to that, I’d say a few things:
   a) This example isn’t meant to show the exact most optimal path, just a path. The reality is I’d go insane trying to find the perfect path (and nearly did so trying to plot my own tax payments this year).
   b) Amex’s rule on only letting you get the same card once every 90 days means that getting those same lucrative sign up bonus a second time would not be possible in the time span described, even if you don’t get the dreaded pop up. There are, however, undoubtably other sign up bonuses that you could find that are worth more than the Smartly card in this example.
   c) Right now, the Smartly card has the highest universal cash back rate of any of the mainstream credit card issuers, so I think it legitimately has long term value to hold (until such time as US Bank inevitably cuts it’s earning rate). For example, it can easily be used to earn a ton of cash back with almost no effort when making quarterly estimated tax payments. ↩︎
10. Note that we’re making this payment on April 6, because it leaves 7 business days until April 15, which is what Plastiq requires to deliver a check. Note that technically your check payment only needs to be mailed by the 15th, not delivered by the 15th, but I’m playing it safe. ↩︎
11. If your spending power does not support this, cycling your credit limit on Amex business cards should be fine. Just make sure to time your first payment early enough that you have time to pay off your balance before making the second payment. ↩︎