Can you get a loan to pay taxes?

Yes — both personal and business loans can be used to pay an IRS or state tax bill. However, the IRS also offers its own repayment options (installment agreements and the Fresh Start Program) that often cost less than external financing. For business owners with a large tax liability, a business term loan or working capital advance may be more accessible and faster than a personal loan.

IRS payment options vs. external loans

Before taking out a loan to pay taxes, understand what the IRS offers directly:

IRS installment agreement: Pay your tax bill in monthly installments. Setup fee: $31–$225 depending on type and income. Interest rate: Federal short-term rate + 3% (currently ~7–8% in 2026). Failure-to-pay penalty: 0.25–0.5%/month on outstanding balance. Often cheaper than personal loan rates for moderate tax bills.
IRS Offer in Compromise (Fresh Start Program): For taxpayers who genuinely cannot pay the full amount, the IRS may accept a reduced settlement. Qualification is strict — not for everyone — but it's worth checking before taking on debt.
Currently Not Collectible (CNC) status: For severe financial hardship, the IRS can temporarily suspend collection. Interest and penalties continue to accrue, but no active collection actions occur.

When an external loan makes sense

An external loan — personal loan or business loan — makes sense to pay taxes when:

The total interest + fees of the loan is less than the IRS penalties + interest on the installment agreement (run the math).
You need the IRS lien off your record quickly — tax liens can impact business credit and future financing. A lump-sum payoff removes the lien faster.
Your business has a tax bill and qualifies for business working capital that's faster and cheaper than personal alternatives.
You've been denied for an IRS installment agreement (rare, but happens with previous defaults).

Business loans for tax bills

Business owners often face large quarterly estimated tax bills or year-end tax liabilities. A business term loan or working capital advance used to cover a tax payment is a legitimate use of business financing. Lenders don't restrict use of proceeds for tax payments (they care about your ability to repay, not the specific use). Business loans underwritten on cash flow can be faster (24–72 hours funding) and sometimes more accessible than personal loans requiring income verification. Apply with ClearValue Lending to explore business funding for a tax bill.

Tax liens and business financing

An active tax lien does not automatically disqualify you from business financing. As noted in our Business Loan with Tax Lien guide, most alternative lenders will approve funding with an active lien if an active IRS installment agreement is in place. A lien with no payment plan is the disqualifying scenario. Paying off a tax lien with a business loan — so the lien is released — can improve your business credit standing and open access to bank and SBA financing.

Worked example — IRS installment vs. personal loan

You owe $12,000 in federal taxes. Option A: IRS online installment agreement — $225 setup fee, 7.5% annual interest + 0.25%/month failure-to-pay penalty ≈ 10.5% effective annual cost. Over 24 months: roughly $1,300 in total interest and penalties. Option B: Personal loan at 14% APR for 24 months → total interest ≈ $1,800. In this scenario, the IRS installment agreement is cheaper. At 24% APR on a personal loan, the cost rises to ~$3,200 — significantly worse. Run the actual numbers before choosing external financing.

Sources

The IRS installment agreement program allows taxpayers who owe $50,000 or less in combined tax, penalties, and interest to set up an online payment plan. The current interest rate is the federal short-term rate plus 3% per year, compounded daily. — IRS — Payment Plans
The CFPB's consumer credit guidance advises borrowers considering personal loans to pay tax bills to compare the loan's APR against the IRS's interest and penalty rates before deciding — in many cases, the IRS installment agreement is cheaper. — CFPB — Personal Loans
The Federal Reserve's 2024 Small Business Credit Survey found that tax liabilities were among the top stated uses of working capital products by small business owners — indicating tax-bill financing is a common legitimate business use. — Federal Reserve — 2024 Small Business Credit Survey
Under IRS Code Section 6321, a federal tax lien arises automatically when a taxpayer neglects or refuses to pay a tax liability after demand — and this lien attaches to all property, including business assets, affecting access to financing until resolved. — IRS — Understanding a Federal Tax Lien

Key takeaways

Yes — personal and business loans can be used to pay tax bills. Whether you should depends on the math vs. the IRS's own payment options.
IRS installment agreements (7–10% effective annual cost) are often cheaper than personal loan rates — run the comparison before borrowing.
Business owners with a tax bill may qualify for business working capital that's faster and more accessible than personal loans.
An active IRS installment agreement generally doesn't block business loan approval; an unresolved lien with no payment plan often does.
Paying off a tax lien with financing releases the lien and can open access to bank and SBA financing.
Related: Business Loan with Tax Lien | Personal Loans for Self-Employed | Business Loan Requirements 2026