Income and Investments Are Credit Card Rewards Taxable Income? Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by TurboTaxLisa Modified Jan 6, 2021 2 min read Perhaps you took advantage of those enticing credit card offers that include cash back rewards that showed up in the mail or maybe you are considering taking them, but don’t know if the rewards have to be included in your taxable income. For the most part, the IRS treats credit card cash rewards as discounts rather than taxable, supplemental income since you are not getting the cash in exchange for anything. The cash rewards are an incentive to purchase something and thereby reduce your taxable income. Are There Any Cases Where Credit Card Rewards Would be Taxable? In the case of large sign up bonuses on credit cards, the IRS may require you to report your rewards as income. In this case the credit card issuer would add a disclosure to the credit card agreement that your rewards may be reported to the IRS if you get over a certain dollar amount in rewards. If they are reported to the IRS, you would receive a form 1099-Misc and would need to report the rewards as income. Large travel rewards could also be reported to the IRS, but the credit card issuer would disclose whether or not your rewards would be reported. If you received a credit card rebate or reward on a business purchase, it’s important to remember that the rebate or reward will have to be deducted from the cost of the product before you take the deduction. Sorry you can’t receive a rebate or reward and deduct the entire purchase price. For instance, if you are self-employed and purchase a $200 phone and get a $50 rebate, you can’t deduct the entire $200. You need to reduce the tax deductible amount to $150. Tip: Learn the benefits of sticking to one credit card. Cash Back Rewards Versus Prizes It’s important to remember, that a cash back reward for a purchase and a taxable award or prize are very different. Taxable awards or prizes are taxable as income so if you were lucky enough to win a $25,000 cash prize in a drawing for new cell phone customers you won’t be able to escape claiming the prize as income since it can’t be treated as a discount. Don’t worry about knowing these rules. TurboTax will ask simple questions related to you and let you know what income is taxable and what is not. Previous Post Schedule K-1 Tax Forms Basics (What Are They & When… Next Post Foreclosure and Taxes: What You Need to Know Written by Lisa Greene-Lewis Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis Follow Lisa Greene-Lewis on Twitter. Leave a Reply Cancel reply Browse Related Articles Income and Investments What Income is Taxable and Non-Taxable? Family Love and Marriage: Some Tax Benefits of Marriage Taxes 101 Cash Income Tax (How to Report Cash Income to the IRS ) Income and Investments 3 Tax Reasons for Why You Should Think Twice Before Bet… Tax Planning Five Military Tax Tips to Help You Keep More of Your Mo… Deductions and Credits Taxes from the combat zone: should you file or not? Tax Tips Don’t Forget These 7 Stimulus Relief Related Last Min… 401K, IRA, Stocks Using Your 401k to Reduce Taxable Income Taxes 101 Income Tax Filing Requirements Tax Planning What Your Scholarships and Grants Mean for Your Taxes?