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While being a homeowner has many rewards, it also has some costly downsides.
One significant contributor to this financial burden is having to pay property taxes annually.
Sad to say, there is no way around this hefty bill unless, of course, you are a renter or, luckily, living for free with family or a partner.
Your tax bill will typically depend on the current assessed value of your property and the state where you reside.
Having lived and owned in California, I dread this tax because it inflicts a sizable dent in my savings.
Thankfully, I have stumbled upon a strategy that effectively softens the financial impact of this expense.
Travel for Nearly Free with Miles and Points
This technique involves applying for one or more credit cards right before property tax season to generate generous sign-up bonuses that can be redeemed for free or discounted flights and hotels.
In fact, my primary goal is to redeem the points I accrue from property taxes on premium cabins since those seats are practically unattainable for me to afford in this lifetime.
Nevertheless, whether I get business class or coach, I am always grateful for whatever free flight I book from my property taxes.
For example, in 2019, I flew on Etihad’s luxurious First Apartments using the bonus points I earned from my property taxes the previous year.
The total cost for this seat was no more than $200 since most of the cost was covered by the points I earned from a couple of credit cards.
It would have cost over $10,000 had I paid for it myself.
A Free Vacation From Property Taxes
It goes without saying that with this approach, I am essentially guaranteed to always break even.
Who in this world doesn’t want to be rewarded with a bonus vacation as a result of paying taxes?
Last year, my property taxes in California cost an arm and a leg.
Before property tax season arrived (September – March), I made sure I had done my due diligence by researching which credit cards offered massive bonuses.
In fact, I just redeemed some of those points for a trip to the Maldives in Spring 2021 on Qatar Airways Business Class.
This has a price tag of over $6,000 one way, but I only paid $15.70 since the 70,000 American Airlines (AA) miles came from an American Airlines credit card offer I applied for a few weeks before my property taxes were due.
My Strategy
| I set a goal to redeem the points I’ll earn from property taxes on a product that I know will cost more than my property taxes – like an expensive all-inclusive resort or a business-class flight. |
It is NOT Completely Free
I want to underscore that even though the flight is FREE, taxes and airport fees are not waived.
Moreover, a surcharge is usually associated with using a credit card to pay property taxes.
In my situation, if I choose to pay with a debit or credit card, the county where my home is located charges a 2.85 percent fee.
Some counties accept Visa Gift Cards or Mastercard Gift Cards purchased using a credit card that earns a category bonus.
Some jurisdictions even allow you to pay using various payment methods, including split payments. You may need to inquire directly with your county whether they accept split payments.
| All Things Considered |
|---|
| In the bigger picture, these credit card fees are quite minimal, particularly if they lead to a premium flight. However, if you’re hesitant to pay these additional fees, you can choose to pay in cash and miss out on the chance for a free vacation. |
Can Anyone Do This?
Unfortunately, this strategy is not for everyone.
Please read along to determine whether this method is suitable for you.
This deal may work for you if…..
- You get a property tax bill yearly
- You have excellent credit
- You are debt-averse, meaning you don’t like debt – you pay off your credit card balance every month on or before the due date.
- You are agreeable to paying a small interest charge (2-3%) for using a credit card to pay your property taxes.
- You have a sinking fund to use to pay your credit card bills on time.
This deal may not work for you if…
- Your property taxes are in escrow.
- You are not able to pay your credit card balances in full on or before the due date.
- You have a lot of outstanding credit card debt
- You are not comfortable paying a 2-3% credit card surcharge
What If My Property is in Escrow?
If you are interested in participating in this travel strategy but currently have your property taxes in escrow, you can reach out to your mortgage lender to determine if you are eligible to have this set-up changed.
Every lender has different terms for removing escrow. In some cases, the loan has to be at least one year old with no late payments. Another requirement might be that no taxes or insurance payments are due within the next 30 days.
NOLO.com
6 Steps To Earn Nearly Free Travel From Property Taxes
Step 1: Create a Sinking Fund
This is a crucial step as it ensures that you are able to pay off your entire credit card debt once the bill is due.
To establish a sinking fund for your property taxes, simply divide the total amount of your property taxes by 12.
Deposit this specific amount in another bank account so you won’t accidentally spend it.
Certain banks offer sign-up bonuses for opening new accounts. Consider applying for one to deposit your property tax sinking fund so you can maximize your benefits.
Transfer this amount to your new bank every month so you are guaranteed to have the cash available when it is time to pay your credit card.
Step 2: Shop Around For The Best Credit Card Offer
When property tax season rolls around, you have to identify which credit card/s to apply for.
While the selection of cards is plentiful and can be a bit overwhelming, typically only 2 or 3 cards have lucrative offers at any given time.
Feel free to join our Travel Miles and Points Facebook Group, where we usually talk about the current travel credit card deals.
Step 3: Apply for Credit Card/s
Apply for a credit card that gives a generous welcome offer around October/November and another card around December/January.
| California Property Tax | Due Date | Pay Before |
|---|---|---|
| 1st Installment | November 1st | December 10th |
| 2nd Installment | February 1st | April 10th |
Step 4: Pay Your Property Taxes With Your New Credit Card
Pay your property taxes using your new credit card before the due date in December.
Repeat this step again before the second installment due date in April.
| Pro-Tip |
|---|
| It bears repeating that you will incur a small fee (2-3%) for using your credit card whenever you pay property taxes. A strategy is to pay only the exact amount that will trigger the credit card sign-up bonus and pay the rest in cash. For example, if your property tax is $5,000 and your new credit card requires only a $3,000 spend, then use the card for $3,000 and pay the rest in cash. That way, you only incur a fee on the amount charged to your credit card. Alternatively, you can put the remaining amount on another credit card with a generous welcome offer! A heads up, though, that not all counties accept split payments. |
Step 5: Pay Your Credit Card Bill
Use the money you saved in your sinking funds to pay your full credit card bill before its due date.
Do not skip this step. Paying the bank hefty credit card interest rates is never a good idea.
Step 6: Book Your Nearly Free Travels
Wait for the welcome offer to roll in and redeem your points for nearly free flights or hotels.
| How to Book Free Travel |
|---|
| Booking free travel using points and miles can be challenging and overwhelming at first. Thankfully, there are a handful of ways to make searching easier. There are a lot of award search tools available now, more than ever. Seats.aero, roame.travel, awardtool.com, pointsyeah.com and point.me are some of the most popular websites. For busy individuals just like myself, I prefer receiving a daily flight deal alert from subscriptions, such as Thrifty Traveler Premium. |
Recommended Travel Rewards Cards
Since generous offers come and go, our list of recommended travel credit cards change every so often.
Therefore, we make it a point to rank them accordingly, placing lucrative limited time offers in the top of the list.
As always, we are here to provide guidance if you have specific questions about what credit cards are best for you, you can reach out to us via this consultation form or at the Travel Miles and Points Facebook Group.
Final Thoughts
As Benjamin Franklin famously said, “In this world, nothing can be said to be certain, except death and taxes.”
Who does not want a silver bullet to magically defer or eliminate property taxes? That might just be wishful thinking.
This property tax bill will arrive come hell or high water, so it’s better to be prepared to face the music than be left high, dry, and broke.
I hope that the technique I described in this post suits your financial situation so that you may be rewarded with a free holiday after paying your property taxes too.
ADVERTISER DISCLOSURE: The Frugal Tourist has partnered with CardRatings for our coverage of credit card products. The Frugal Tourist and CardRatings may receive a commission from card issuers.
EDITORIAL DISCLOSURE: Opinions, reviews, analyses & recommendations are the author’s alone and have not been reviewed, endorsed, or approved by any of these entities.
USER-GENERATED CONTENT DISCLOSURE: The comments section below is not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all questions are answered.
I love hearing of your strategies in how to do this. I especially like the Sofi idea of where to put the money while waiting. In reality though the fee for paying taxes with the credit card should be added to the amount you paid for the ticket. So your ticket really cost 115.70 or $215.70. Still a very good deal, but it gets the real amount out front.
Dear Patty, I’m so glad you found the strategy useful. SOFI is a great travel debit card / ATM because it reimburses all the ATM fees you incur when you withdraw money anywhere. And, yes, thank you for pointing that extra surcharge out. I did include a statement at the bottom to address that but I’m certainly following your advice and added a few statements to let readers know that even though the flight is free, there are some extra fees to be paid. Thank you so much again for reading and for your valuable feedback!
That is a brilliant strategy! Thank you so much for sharing.
Thank you so much, Rena!
Yes, great post. I’ve taken numerous trips abroad to meet The Big Guy using reward miles. Great way to reduce the flight costs for sure.
Absolutely! If you are OK with paying the small fee on the taxes, I think this is a great way to earn a lot of miles for free travel in the future.
Our property taxes have been going up about $900 per year! This strategy would help take the sting out of that. I had thought about paying our property taxes by credit card before but as you mentioned, it is pretty much a wash due to the fee of paying by credit card. This is a clever way to deal with this necessary expense.
Hi Megan, thank you for stopping by! Sorry about the yearly tax increase. Certainly a bitter pill to swallow. While the 2.85% fee can be off-putting when using credit cards, I try to use the points I’ve accrued from the taxes on redemptions that costs so much more. This way, it doesn’t only soften the blow, it also makes it a bit rewarding in some odd sense 🙂