Credit Card Rewards And Tax Returns

Tax returns can be tricky when filling out. With the amount of transactions you end up being party to over the course of a year, it can be difficult to figure which ones need to be reported and which ones can be kept out of the records.

When you spend a considerable amount on your credit card, chances are that you’re receiving some decent rewards in return. I’ve personally known people, for instance, who earn $1,000 to $3,000 a year on combined rebates and rewards from credit cards alone. The question then is: should these be reported as miscellaneous income when filing your taxes?

If your rewards and cash-back rebates are taxable, you should be receiving a 1099-MISC from the credit card company as they will be obligated by law to do so. In the case of reward cards, I’ve never actually met anyone who has received such a document, whether they’re getting $100 rebates or $1000 returns. To me, this is a clear indication that rebates and rewards can be treated as gifts (from the credit card company) instead of income, which should mean that it’s fine to keep them out of your tax returns.

As of the moment, there is no clear stance from the IRS on whether credit card rewards and rebates should be subject to federal income tax. Many tax professionals advice that such perks are not considered taxable income and can be treated as such.

While this is almost 100% guaranteed for typical consumer cards, the rules may prove different for businesses whose expenses are considerably larger than a typical cardholder. In such cases, consulting with an attorney or a tax expert may prove a better course of action.