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Is service fee for quarterly tax payments via credit card deductible?

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  • Lithium
    replied
    Bank of America’s travel reward card gives you 1.5% base, which you can redeem for a 75% bonus if you’re in the platinum honors tier once you have 100k in assets at ME. That works out to 2.625% you can use for statement credits to travel.

    If you have the cash rewards card you get 2% for groceries and you can pick a 3% category. However if you are in the platinum honors tier, you get the same 75% bonus - voila, 3.5% on groceries and 5.25% on a category of your choice. I usually rotate the last one between online shopping and gas. Every time you get $25 in cash rewards the credit can be delivered to your Merrill edge account.

    Once you are burned out on chasing bonuses it is a pretty good system.

    Leave a comment:


  • Molar Mechanic
    replied
    I’ve paid large tax bills with a 3% cash back card.  I don’t do it for travel rewards, and wouldn’t unless I had an imminent redemption planned.  Rewards points are too hypothetical, and tend to deflate if you don’t use them quickly.

     

    However, paying 1.8% and getting 3% back is just free money!  That is in addition to getting an additional 3 weeks till I actually have to pay money.

    Leave a comment:


  • JK
    replied
    Great opinions. Thanks for all the input. I was on the fence about whether it was worth it or not, but needed a little sense knocked into me. Much appreciated.

    Leave a comment:


  • ZZZ
    replied
    Why are you paying a fee at all to pay your taxes? To chase pennies?

    Eftps.gov

    Leave a comment:


  • DMFA
    replied


    How the question is, what credit card is WhiteBeard using that gives 3% cash back for all purchases?
    Click to expand...


    I know there are several cards that give you a rewards bonus if you have enough invested with them, usually $100,000 I think.  BofA/ML for instance will give a 75% rewards bonus if you have $100,000 invested with them, but I think their cash back card is only 1% for general expenses with some 2% and 3% categories like gas, groceries, home improvement stores, etc.

    Leave a comment:


  • treesrock
    replied




    As a high net worth physician, I don’t chase small variations in credit card rewards.  I get 5% cash back at Amazon, and I have a 3% cash back card for all other purchases.  My goal is simplicity and flexibility.  When I want to fly internationally in a lie flat seat, I pick the best airline, the best time, and the best route and pay cash.  Given the 3 to 5% cash rewards, I am doing just fine and I don’t need to think about or waste time chasing all the rules and regulations for airline rewards.
    Click to expand...


    I agree with WhiteBeard, what you are suggesting just doesn't seem worth it considering all the limitations on credit card points used for air travel.  How the question is, what credit card is WhiteBeard using that gives 3% cash back for all purchases?  I know that Alliant card does it for the first year, but comes with an annual fee and drops in the second year...

    Leave a comment:


  • jfoxcpacfp
    replied
    The service fee for paying your personal income taxes is not deductible. The only way it would be is if you charge corporate or other business taxes (annual LLC fees with the SOS, for example).

    I don't know if it is possible to pay 941 taxes with a cc, guess so. In that case, the fee w/b deductible also.

    That said, it is refreshing to read the commonsense answer from White.Beard.Doc after the point-chasing threads from the high-income crowd that has graced this forum with a variety of time-suck reco’s.

    Leave a comment:


  • White.Beard.Doc
    replied
    I just go online each quarter and pay the estimated taxes in about 1 minute as an electronic payment drawn from my checking account.  If you are making great income, I recommend you consider doing the same.

    As a high net worth physician, I don’t chase small variations in credit card rewards.  I get 5% cash back at Amazon, and I have a 3% cash back card for all other purchases.  My goal is simplicity and flexibility.  When I want to fly internationally in a lie flat seat, I pick the best airline, the best time, and the best route and pay cash.  Given the 3 to 5% cash rewards, I am doing just fine and I don’t need to think about or waste time chasing all the rules and regulations for airline rewards.

    Leave a comment:


  • Is service fee for quarterly tax payments via credit card deductible?

    New attending this year paid exclusively via 1099 as I am a sole proprietor. 2018 was still a (relatively) low tax year due only being an attending for part of the year. 2019 will be a much different story as I'll be making significant money during peak earning years. My CPA currently has it setup for 2019 where automatic withdrawals from my bank account will be made for both federal taxes. This was originally setup for convenience and the 1.87% fee to pay federal taxes (Pay1040) and ~2% via credit card bonuses just didn't move the needle that much when you talk about the difference (0.13%). I also have lots of other financial items to get squared away in my post-residency life so this wasn't as big a priority.

    However, one thing I forgot to really inquire about was whether the 1.87% service fee was deductible since I am a sole proprietor? If it is tax deductible, it is starting to become a little more attractive to pay via credit card.

     

    I'm a relatively high earning physician immediately out of training. I estimate ~150k in federal tax for 2019. 1.87% of 150k = $2,805 in fees. If that is deductible and I anticipate 35% marginal tax bracket, that seems like a $981 (35% * $2,805) savings. Or essentially only paying $2805-981 = $1,824 in fees.

    Couple that with putting 150k on a travel rewards card where I can get better than 2% on my return when used on travel (conservatively 2.25%), that seems like $3,375 (150,000*2.25%) worth of travel.

    So, $3,375 in free travel minus the $1824 in fees = $1551 net benefit.

    Essentially, my questions are...

    1) Is if the service fee for tax payments are actually DEDUCTIBLE for a sole proprietor? If not, this is less compelling.

    2) Is my math about right in the above scenario?

    3) I've never paid my taxes this way before. I assume it's pretty easy overall, but was curious if people think it's worth it. I'm making good money now, but ~$1500 is nothing to sneeze at...especially if it's easy. That also doesn't even take into account state taxes.

    Thanks for the help.

     

     
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