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Does the IRS Consider Credit Card Rewards and Cash-Backs as Taxable Income
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The IRS maintains taxpayers will not be required to state flyer miles or any type of rewards attributable to travel as part of their taxable income. Therefore this covers ‘in-kind’ benefits and miles and this includes cash back because one will be receiving a rebate on what they have spent. Then IRS indicates that one doesn’t have to pay tax on cash-back reward the same as you would have to pay on a rebate on purchases.
Exceptions of rewards as taxable income
However, there are exceptions especially for those credit card reward programs that give huge signup bonuses that the IRS might consider as taxable income. If the card issuer gives a referral bonus or you receive let’s say $700 to open an account and the amount gets to your account before you can use the credit card then there can be an exception. Technically this is the interest you receive and should be reported on Form 1099-INT but it can sometimes happen or not.
Equally business purchases are considered differently in that rebates from business credit card purchases are taken from the costs of the purchases thus reducing the amount one can deduct from their taxes. Although this is not taxable income it nonetheless increases one’s tax burden.
If you give away your rewards to maybe a charity you cannot claim a tax deduction because that is a gift from the company to you.
The IRS maintains taxpayers will not be required to state flyer miles or any type of rewards attributable to travel as part of their taxable income. Therefore this covers ‘in-kind’ benefits and miles and this includes cash back because one will be receiving a rebate on what they have spent. Then IRS indicates that one doesn’t have to pay tax on cash-back reward the same as you would have to pay on a rebate on purchases.
Exceptions of rewards as taxable income
However, there are exceptions especially for those credit card reward programs that give huge signup bonuses that the IRS might consider as taxable income. If the card issuer gives a referral bonus or you receive let’s say $700 to open an account and the amount gets to your account before you can use the credit card then there can be an exception. Technically this is the interest you receive and should be reported on Form 1099-INT but it can sometimes happen or not.
Equally business purchases are considered differently in that rebates from business credit card purchases are taken from the costs of the purchases thus reducing the amount one can deduct from their taxes. Although this is not taxable income it nonetheless increases one’s tax burden.
If you give away your rewards to maybe a charity you cannot claim a tax deduction because that is a gift from the company to you.
