Have you avoided paying your tax bill with a credit card because you just couldn't bear paying any more than you must to anyone on April 15th? I suspect many of you fall into this category, as do I. Even if the dollar amount is small, the thought of paying an additional 2.49% to cover the fee charged by credit card companies always makes me cringe. So, I continue to pull out the trusty checkbook, dust it off, and write one of the handful of checks I send out each year.
You can imagine my excitement when I read the recent IRS announcement proclaiming that the 2.49% fee is now deductible. Without reading much further, I did a little tax happy dance and thought that maybe the IRS was finally starting to catch up with the times. The goal is to obviously convince more taxpayers to e-file and make electronic payments, so why not make it less cumbersome to do so? It all sounded too good to be true, so I began reading more of the details.
It turns out that although the deduction is still a change for the better, it probably won't apply to most people. The kicker is you must claim the expense as a miscellaneous deduction on your Schedule A. Other expenses that generally fall into this category include tax preparation fees you paid to your accountant or the cost of tax prep software. And while these fees can add up, you are only able to write off expenses that total more than 2% of your adjusted gross income. That would be $800 if your AGI is $40,000.
The fact is most taxpayers never meet this threshold. According to the IRS, most filers don't even itemize their deductions, so it wouldn't even matter in the first place. However, there still may be some of you out there who are slapped with a big enough tax bill to make paying with your credit card worth it. If so, don't forget to take advantage of the change next year by using plastic to pay Uncle Sam this year. Although the IRS announced this new ruling last week, the deduction isn't available until next filing season.
