Some business owners or people who pay estimated tax payments end up paying their federal income taxes with a credit card.
If you pay your income tax (including estimated tax payments) by credit or debit card, you can deduct the convenience fee you are charged by the card processor to pay using your credit or debit card. The deduction is claimed for the year in which the fee was charged to your card as a miscellaneous itemized deduction on line 23 of Schedule A (Form 1040) (and is subject to the 2% of the adjusted gross income floor). (Source: www.irs.gov)
However, I always suggest that you look at what it net to you and don’t necessarily let the tax tail wag the dog. The deduction of those fees may sound great, but you really need to analyze what the cost of the convenience fee is relative to the rewards points/frequent flier miles you are earning by using the credit card on a net basis. It may be the your reward program plus the deduction is a better deal than the convenience fee, but it still may stand that it costs you more than it is worth its while.
Check out these other articles – Is It Time To Change Credit Cards? , The Top 10 Most Overlooked Tax Deductions , Tax Changes For 2010 , Top 10 Credit Card Comparison Resource Sites , Overdraft Changes On Your ATM Card
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
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