This transcript was generated from the episode audio and may contain minor errors.
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If you are going to pay taxes and, you know, there are worse problems in life, you might as well do all you can to save on them. You know, that's my perspective. Like I don't necessarily enjoy paying taxes like nobody does, right? But my perspective is, you know, don't complain about it too much. Definitely take all the deductions, all the credits, anything that you're entitled to.
You know, if you make money, you got to pay taxes, but try to figure out where you can save legally, of course. And that season, the tax paying season, is coming up for many of us in the US. There are various deadlines and such, but one of the big ones is in April. So today, a caller wants to know about paying their taxes on a credit card that offers cash back. They're like, "Hey, if I've got a big tax bill, can I actually get paid some cash back, you know, for spending?" So is this perhaps an all new side hustle?
Might there also be some drawbacks? Well, let's find out. Welcome to Side Hustle School. My name's Chris Guillebeau. A detailed question in my answer coming up after the break.
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Hi, everyone. This is Tyler calling from Charlotte. It's that time again. Tax season's coming up, and this year I owe a good amount of money, in part because I made $15,000 in my side hustle. Thanks for the tips.
But of course, now I owe some money on the money I've made, which is less exciting. Fortunately, I've set aside 30% of the profits, as you suggest, but I'm wondering if there's another way I can use a credit card to earn cash back on the money I paid to the government. Is that a wild idea or am I onto something? Let me know if paying taxes can be my new income generating project. [Music]
Okay, well listen, I love the hustle.
I respect the hustle. I respect the creative thinking. And as I said, nothing wrong with trying to get whatever credits and deductions you can get while still paying what you owe. But what I'm coming to here is there's a big problem. There's one thing that our caller has not considered.
That's because if you use a credit card to pay taxes, at least most cards in most situations, maybe this is different in some places of the world, but most of the time, you're gonna be charged a processing fee. And most of the time, once again, that fee will be greater than the cash back percentage you receive. So this is kind of negative math. It's actually not making money, it's spending more money. So you might have to pay a fee of about 3%.
Sometimes it's a little bit less than that. I've seen like two and a half percent, sometimes maybe lower, sometimes a little higher. The point is, let's say it's an average 3% fee, then you're gonna earn 1% back. Okay, so I'm really not that good at math, like my degree was in sociology, but I think if you did that often enough, you'd eventually run out of money. And my goal is to help people make money, not run out of it.
So that's the problem, and it's not a small one, right? They've actually thought about that. So I think it's best to use that cash back card for something else. So hopefully you'll get some benefits elsewhere. And sorry to disappoint you on saving on the tax bill there, but hopefully I'm actually gonna save you in the long run because you don't wanna pay that expensive fee.
There could be some exceptions, and maybe sometimes you do wanna do it anyway because you're trying to meet the minimum spend on a credit card to earn the bonus, you know, the bonus points or whatever you're getting. So you have to kind of run the numbers there, but in general, you know, just doing the cash back thing, it's not going to work or not gonna be profitable. So that's the big thing to look out for. Good luck. Listeners, let me know your experience, or if you've got a question about something else, a business idea, something you're trying to move forward on to pursue as a side hustle or a small business even, sidehustleschool.com/questions.
We'll continue to feature them every week, along with updates from listeners as they launch and grow their projects. Hey, take care of yourself out there, get to work, do something exciting to make some money and then pay taxes, but that's okay because hopefully you're making more money than you're paying on taxes. All right, much more to come. My name's Chris Guillebeau, this is Side Hustle School. [Music]
From the Onward Project.
