Tax time is upon us yet again, which means many of you will be scrambling over the next few weeks to get your tax returns done and cut a check to old Uncle Sam.
However, in recent years the IRS has made it fairly easy to ditch the checkbook and pay your tax bill via credit card. In many cases you may even be able to deduct the convenience fee card companies charge to process electronic tax payments. So why should you think twice before paying your tax bill with plastic and racking up extra credit card points or miles?
Not only do convenience fees average a hefty 2.5% ($125 on a $5,000 tax bill), but not everyone will qualify for the miscellaneous itemized deduction (Subject to the 2% limit on Form 1040). Make sure you do your research first to see if you would qualify.
And you should never pay taxes on a credit card if you plan on carrying a balance to pay off the debt over time. Even a low-interest credit card charging less than 10 percent interest would be cost prohibitive. The fact of the matter is there's probably a more efficient way to dig up the money for your tax bill when cash is tight around the house.
Try a generous family member first, or visit IRS.gov for more information about payment options that could save you money in the long run.
