Chase Freedom & 5% Back on PayPal: Use on Federal Income Tax Payments?

April 3, 2018 By Jonathan Ping 14 Comments
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The Chase Freedom Visa card has updated its quarterly 5% cash back categories for April 1st to June 30th, 2018. One of the eligible cash back categories is PayPal. April is also the time to make both income tax payments along with 2017 tax returns and also quarterly estimated taxes for 2018. PayUSATax.com is an IRS-approved payment processor and accepts PayPal as a payment with a 1.97% transaction fee.

Here is the fine print:

Includes transactions made using your Chase Freedom card with PayPal for purchases or sending money. Eligible transactions only qualify for a total of 5% Cash Back rewards. Purchases made using PayPal at other current 5% quarterly categories will be awarded a total of 5% Cash Back rewards on up to $1,500 in combined purchases. When you send money to Friends & Family via PayPal using your Chase Freedom card, standard transaction fees apply. See PayPal’s fees. Websites and other information provided by PayPal are not within Chase’s control and may not be available in Spanish. Must have/open a PayPal account to send and receive money.

Technically the Chase Freedom earns 5x Ultimate Rewards points, which might actually get you more than 1 cent per Ultimate Rewards point value if you have a Chase Sapphire Preferred or Chase Sapphire Reserve card.

Bottom line. From April 1st to June 30th, 2018, you can make a tax payment of up to $1,500 using PayPal with Chase Freedom as the funding source and get earn 5% cash back while paying only ~2% fee, for a net ~3% profit. You must go through PayUSATax.com. That’s a max profit of about $45, which you could think of as covering your tax prep software.

Filed Under: Credit Cards, Deals & Offers
Last updated: June 11, 2019
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Comments

  1. Mathematician says
    April 5, 2018 at 8:54 am

    The math is wrong. It should be 1.0197*0.05-0.0197 = 0.031285 = 3.1285% profit if you value UR point at 1c/point.

    Reply
    • Jonathan Ping says
      April 5, 2018 at 11:34 am

      You’re most likely right. I’m going to just change it round numbers. The fee is around 2%. The cash back is 5% of the amount charged (which as you point out will include the added 2% fee). The net difference is still around 3%.

      Reply
  2. Random Visitor says
    April 5, 2018 at 1:00 pm

    Doesn’t paypal charges it own fee when paying by a credit card. Wondering if 1.97 % + Pay Pal fee will put you over that 5% redemption rate for Chase?

    Reply
  3. Fred says
    April 8, 2018 at 7:32 am

    FYI, I believe you can make 2 separate payments (for your annual Form 1040 payments). See https://payusatax.com/IRS/Home/LoadStaticPage?pageName=FAQ#17 and https://payusatax.com/IRS/Home/LoadStaticPage?pageName=FAQ#14 .

    Reply
  4. Mahesh says
    April 8, 2018 at 11:57 am

    If you are using tax software like turbotax or taxact, dont you have to use them to send money to IRS ? How can you use paytaxusa with those softwares?

    Reply
    • Fred says
      April 8, 2018 at 12:16 pm

      Mahesh, I filed two years ago with HRB. They refused to confirm to me, but I selected the option that I was sending in a check, and then used pay1040 (and had no problems). This year I used Taxslayer, and they did confirm to me that I should select the “mailing a check” option.

      Reply
  5. kyle says
    April 11, 2018 at 8:14 am

    Can you pay State taxes using this website?

    Reply
  6. Lynzee Lai says
    April 19, 2018 at 12:53 pm

    I have the Chase Freedom card, and I love it! I am always able to collect enough points per year to purchase at least 2-3 flights for a vacation or to visit my parents etc. The Freedom card does not have a yearly charge, where as the Sapphire card does ($95), but there are no foreign transaction fees, and when you redeem them for travel booked through Chase, you get a 20% discount — meaning that each point has a value of 1.25 cents.

    Reply
  7. Lynn says
    June 18, 2018 at 7:51 pm

    Mine didn’t post correctly. Only got the 5% for the fee, not the payment using paypal with the freedom card!

    Reply

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