Can I pay taxes with a credit card? What's the fare?

You can pay taxes with a credit card, but you'll typically pay a fee of just under 2% of the total transaction amount. For example, if you pay $10,000 and charge 1.75%, the fee would be $175.

Doing this might make sense for a number of reasons, including if you want to get a new cardmember welcome bonus, get more rewards than the cost, or are taking advantage of the 0% introductory APR purchase offer.

You can pay your federal income taxes with a credit card, and most states also allow you to use a major credit card to pay your taxes.

However, the IRS limits how often you can use your credit card for certain taxes. For example, if you file tax return Form 1040 (U.S. Individual Income Tax Return), you can use two credit card payments per year to pay the tax due. If you pay your estimated taxes quarterly, you can only make two credit card payments per quarter.

If you want to pay your taxes with a credit card, you must pay through one of the third-party processors designated by the IRS to handle credit card payments:

They accept credit cards from major credit card networks, including American Express, Mastercard, Visa, and Discover. Both processors also accept payments from certain digital wallets such as PayPal. PayUSAtax used to handle taxes as well, but it no longer does.

Here are the fees these companies charge for using a credit card as a payment method:

To pay by credit card, visit the IRS website and select one of the available third-party payment processors. The IRS will redirect you to the company's website, where you can choose to pay personal or small business taxes.

These processors also accept federal tax payments with debit cards at a reduced cost.

Read more: Here are 7 free tax filing options

Here are four situations where it makes sense to use a credit card to pay the taxes you owe:

If you owe money at tax time, using a new card to pay your bill may allow you to quickly meet the spending requirements for your credit card sign-up bonus. This can be particularly useful if you're concerned that your regular budget won't meet your required spending thresholds. Since you'll have to pay taxes anyway, it may be worth the extra service fee to secure your winnings.

Here are the cards with great welcome offers:

Some rewards credit cards have rewards rates high enough to offset the third-party processing fees you pay when you use your credit card to pay taxes:

Some IRS credit card payment processors allow PayPal payments, so you can earn more with cards that offer bonus rewards on PayPal transactions. These may include cards with rotating categories, such as the Chase Freedom Flex and Discover it® Cash Back Credit Card.

Unfortunately, unexpected tax bills can happen. If you owe a lot of money but don't have the cash to pay it, using a credit card with a 0% APR can make it easier to manage:

These offers allow you to avoid interest on new qualifying purchases during the 0% APR introductory period, giving you the flexibility to pay off your balance over time.

Keep in mind that you'll still need to make the required monthly payments, and your goal should be to pay off the bill in full before the promotional period ends. Otherwise, the standard purchase APR will apply (which may be as high as double digits).

If you've forgotten your tax bill and are at risk of missing a payment deadline, using a bank card is one of the fastest ways to pay and ensure it's processed promptly to avoid late fees.

When you pay your taxes with a credit card, the third-party payment processor will send you a confirmation with a time-stamped proof of payment for your records.

Read more: How to file a tax extension (Remember, you still have to pay by the deadline)

There are some benefits to using a credit card to pay taxes, but there are also some significant disadvantages to keep in mind:

As mentioned earlier, third-party processors charge a fee to process taxes paid with a credit card. The fee is usually slightly less than 2% of the payment amount.

Credit cards are a relatively expensive form of credit.

If you use your card to pay your taxes but are unable to pay the bill in full by the statement due date, interest will accrue on the unpaid balance. Over time, interest charges can add hundreds or thousands of dollars to the cost.

If possible, use a credit card to pay taxes only if you can afford to pay off the balance in full before the balance due date to avoid costly high-interest fees.

If you have a large tax bill and pay it with a credit card, your balance could increase by hundreds or thousands overnight. If your new balance takes up a lot of your available credit, the transaction will increase your credit utilization, which accounts for about 30% of your FICO score.

For example, let's say you have a credit card with a credit limit of $1,000. You use the card to pay your $500 tax bill. Afterwards, your balance is $500, so your credit utilization ratio (the percentage of available credit you're using) is 50%. Generally speaking, creditors like to see a credit utilization ratio of 30% or lower, so such a high percentage may affect your credit score.

If you pay your tax bill with a credit card, you usually don't have to worry about paying additional cash advance fees or a higher APR on your cash advance. The transaction is generally considered a retail purchase rather than a cash advance.

Most states allow you to pay income tax using a credit card, but you may need to pay a transaction fee or convenience fee. Here are some examples of fees in different states:

Some states limit the types of credit cards that can be used. For example, some states only allow Mastercard or Visa as payment options for taxpayers.

After you make a payment, you generally do not need to mail a copy of your payment receipt or payment confirmation email to the IRS. However, you do need to file a tax return or an amended tax return.

The editor of this article is Rebecca McCracken

Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions are solely those of Yahoo Finance and do not represent those of any other entity. Financial product details, including card rates and fees, are accurate as of the date of publication. All products or services are provided without warranty. Check your bank's website for the latest information. This website does not include all currently available offers. A credit score by itself does not guarantee or imply approval of any financial product.