Tax Hack: Why Equity Partners Use Credit Cards to Pay Quarterly Taxes

Written by Chris DeVito

For equity partners at Am Law 100 firms, managing quarterly estimated tax payments is a regular part of life. These partners often face significant tax liabilities due to the structure of their compensation, typically K-1 income that is not subject to automatic withholding. While most focus on ensuring timely payments to avoid IRS penalties, some savvy equity partners are taking a more strategic approach: paying quarterly taxes with credit cards.

Yes, credit cards—when used properly—can become a tax management tool. Here's how it works, and why more high-earning partners are leveraging this strategy to optimize cash flow, earn rewards, and squeeze extra yield from their cash.

The Basic Idea: Float + Yield

The IRS allows tax payments via third-party payment processors, and those processors accept credit cards. While there's a processing fee (typically around 1.85%–1.98%), the upside for equity partners can far outweigh the cost.

The key benefit is float: by putting a quarterly tax payment on a credit card, the partner can delay the actual outflow of cash for up to 30–45 days (depending on their billing cycle). During that period, the cash that would have gone to the IRS can instead remain parked in high-yield savings accounts (HYSAs), Treasury bills, or money market funds, earning interest.

Multiply that effect across four quarters, and you're getting an extra 4 months of yield every year—on what can be hundreds of thousands of dollars in tax payments.

Example: Real Dollars at Work

Let’s say an equity partner owes $100,000 in federal and state estimated taxes each quarter—a total of $400,000 per year.

They use a credit card to pay each quarterly installment, then pay off the card in full before interest accrues. During the 4–6-week float, the $100,000 remains in a HYSA yielding 4.5%.

Here’s the math:

• $100,000 at 4.5% annual yield earns about $375/month
• Over 4 payment cycles, that’s $1,500 in additional interest per year
• Subtract roughly $75 per payment in processing fees (about 1.87%), or $300 annually

Net benefit: $1,200–$1,500 per year, simply for shifting payment method.

That’s also ignoring credit card rewards. Many premium cards offer 1.5%–2% cash back or flexible points worth even more, depending on redemption strategy. Stack that with the interest earned, and the total benefit can exceed $8,000 annually, tax-free in some cases if classified as credit card rewards.

Why This Matters for Equity Partners

Equity partners often have variable cash flow and large, lumpy expenses. Using this strategy gives them:

• Better cash flow timing: More flexibility to manage liquidity, especially when partnership draws are timed irregularly.
• Free yield: Boost returns on money that would otherwise be sitting idle or sent away early.
• Reward arbitrage: If paired with a business or premium credit card, points or cash-back earnings can be meaningful.
• No IRS penalty: As long as the payment is processed by the due date, there's no downside from a tax compliance standpoint.

Risks & Considerations

While the upside is real, there are a few things equity partners need to consider:

• Discipline is critical: You must pay off the card in full each month to avoid high interest charges.
• Payment limits: Some credit cards may not offer high enough limits to cover large tax payments. You can however, use up to 2 cards per transaction and pay any remaining balance as your normally would have.
• Fee vs. reward math: Make sure the value of rewards and float exceeds the credit card processing fees.
• Accounting complexity: Track these payments and reimbursements carefully, especially if using a firm or business account.

Final Thoughts

For high-earning attorneys who understand the value of every basis point, paying quarterly taxes with a credit card is an easy way to enhance cash flow and maximize short-term yield. It's not a gimmick—it’s a low-risk, high-efficiency strategy that takes advantage of timing, interest rates, and credit card economics.

Equity partners already operate with a keen eye on profitability. This approach aligns with that mindset—and every extra dollar working for you is a win. Just be sure to run the numbers and work with a trusted financial advisor or CPA to ensure this fits cleanly into your broader tax strategy.

Registered Representative of, and Securities and Investment Advisory services offered through Hornor, Townsend & Kent, LLC (HTK). Registered Investment Advisor, Member FINRA/SIPC.  800-873-7637.   www.htk.com.  Power Forward Group is unaffiliated with Hornor, Townsend & Kent, LLC.

HTK does not provide legal and tax advice. Always consult a qualified tax advisor regarding your personal tax situation and a qualified legal professional for your personal estate planning situation.

For Educational Purposes Only – Not to be relied upon as financial, tax, or legal advice. 8179688DH_JUL27