You can pay for just about anything with a credit card today, even your mortgage or rent. It’s only natural to wonder what else you can pay with a credit card — like property taxes. The IRS lets you pay your federal taxes with credit cards, so why not local taxes, too?
Well, just because you can do something doesn’t mean you should. While there may be benefits to paying property taxes with a credit card, there are some considerations before you do.
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Is Charging Property Taxes to a Credit Card Possible?
Some local governments allow homeowners to pay their property taxes with a credit card. However, you might have to pay a convenience fee of around 2% or higher. For example, New Orleans Parish in Louisiana charges a 2.49% fee, and Jackson County in Mississippi charges a fee of 3.3%.
Still, check with your local tax collector’s office to confirm whether your city or county accepts credit card payments for property taxes because not all do.
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Should You Pay Your Property Taxes With a Credit Card?
“As with any financial decision, be sure to weigh the pros versus the cons to ensure the benefits of making payments in this manner outweigh the costs,” says Jeffrey Wood, certified public accountant and partner at Elysium Financial in South Jordan, Utah.
Some people love to use their credit cards for everything — and for good reason, Wood says. You earn rewards for your purchases and buy yourself more time to pay as your money stays in your bank account, where it continues earning interest.
Pros and Cons of Paying Property Taxes With a Credit Card
Pros
— Rewards. Paying property taxes with a credit card can be helpful if you are trying to reach the card’s spending minimum to earn a reward, such as companion tickets or airport lounge passes, Wood says.
— Avoid late fees. Then there’s the potential benefit of avoiding a late tax payment. If using a credit card allows you to pay on time and avoid penalties and interest charges, then you may want to fork over the processing fee, Wood says.
— Flexibility. Paying with a card provides an option for managing cash flow because it allows you to delay parting with cash until your credit card bill is due, says Marcel Miu, certified financial planner and founder of Simplify Wealth Planning.
Cons
— Convenience fees. “The primary deterrent to using credit cards for property taxes is that most jurisdictions will charge a processing fee for paying your taxes with a card, usually between 2% to 3%,” Wood says.
— Potential long-term debt. Another risk of using your credit card to cover property taxes is when you can’t pay off your balance. When you carry over debt, you start racking up interest charges and have the added stress of not knowing when your card will be paid off.
— Might lower your credit score. Large tax payments can increase your credit utilization ratio, says Miu. As a result, this could lower your credit score.
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How to Pay Your Property Taxes With a Credit Card
If your jurisdiction accepts credit card payments for property tax bills, you likely have a few ways to make payments.
Many jurisdictions have online portals where payments can be made, Wood says. Try a simple internet search or contact your jurisdiction directly to find out where to pay.
You can also make a payment through ACI Payments, an IRS-authorized website, if your state has a contract with the third-party payment processor. Keep your bill or statement handy in case you need information, such as your jurisdiction code, to process your payment. The site also provides a fee calculator.
If your local tax collector’s office is open, paying by credit card in person may be an option as well.
“As with payments made by other methods, you will still be eligible for a refund if you have overpaid your taxes upon final reconciliation at the end of the year,” Wood says. “You can also make prepayments on your taxes due throughout the year, just as with any other method.”
Can You Pay Other Taxes With a Credit Card?
You could pay your state or federal income taxes with a credit card. However, this payment method might not be ideal because it also comes with a convenience fee, Miu says. For example, if you pay your federal taxes with a credit card, you’ll pay up to a 1.98% processing fee, depending on which payment processor you use.
The best way to pay your income taxes is usually direct debit because there’s typically no fee, Miu says. However, if you can’t pay your taxes in full, the IRS offers installment plans that often result in lower costs than credit card interest rates, he says.
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Can You Pay Property Taxes With a Credit Card? originally appeared on usnews.com
Update 02/29/24: This story was previously published at an earlier date and has been updated with new information.
