Are Your Cash Back Rewards Taxable?

The Internal Revenue Service (IRS) follows fairly clear guidelines when it comes to imposing taxes on cashback earned through credit cards.  It views any cashback that you earn through spending money as a form of rebate and not as income.

Are Credit Card Cash Rewards Taxable Income?

The IRS typically views cash rewards that you earn by spending money on your credit card as discounts as opposed to income. For example, if you spend $2,000 on a credit card that offers 2% cashback and earns $40 as cashback, the IRS will look at the $40 as a discount, thereby exempting it from your taxable income.

Do You Have To Declare Cash Back on Your Tax Return?

You don’t have to worry about reporting the cashback you earn by spending money because the IRS looks at it as discounts. However, you need to report all the cashback you earn through non-spending-linked offers on your tax returns.

Is Business Cash Back Taxable?

From the taxation point of view, the IRS views cashback earned through business credit cards in the same way as it does with consumer credit cards. If you earn cashback by spending money, it does not count as income.

Are Credit Card Points Taxable?

The IRS views reward points and miles that you earn through a credit card in the same way that it does cashback. As a result, if you earn points or miles after meeting spending-based requirements, you don’t have to report them as income. Points and miles you earn by spending on your card fall under this bracket.

Swipe up to Read More on Cash Back Rewards