Are credit card rewards taxable?

Between points, miles, rebates, and bonuses earned from credit card expenditures, it makes sense to ask whether these credit card rewards are taxable.

This guide clarifies what’s taxable and what’s not relating to credit card rewards, aiming to help consumers looking to stay tax compliant as they maximize their credit card rewards and benefits.

Understanding credit card rewards programs

It’s become commonplace for credit card issuers to offer reward incentives as part of credit card programs. Different issuers offer a range of different types of credit card rewards, such as unlimited cash back rewards and flat-rate offerings. Common rewards may include points, shopping offers, frequent flyer miles or other travel rewards, and cash back on purchases.

Rewards can be earned in various ways, including making purchases with specific vendors or services, spending a certain amount in a given period, and sometimes from sign-up or referral bonuses offered by a card issuer.

Potential tax implications of credit card rewards

When it comes to credit card rewards, tax generally does not apply to miles, points, or rebates on everyday spending.

For example, rebates are a percentage of money earned back on purchases. The Internal Revenue Service (IRS) does not view rebates as income, but rather a reduced cost of purchases.

Responsible credit card use in this instance means that consumers don’t need to pay tax on cash that's earned back.¹

When are credit card rewards taxable?

There can also be taxable rewards. For example, when a credit card provider offers a sign-up bonus, tax may apply to it. This is the same for referral bonuses or if rebates are given without requiring any purchases or additional obligation. Generally speaking, if rewards are given without having to do or spend anything in return, they could betaxable rewards.

Consumers may be required to add the cash value of these rewards to their total yearly taxable income.² Consult a tax professional for specific guidance related to one’s situation.

How to handle taxable credit card rewards

Credit card providers are required to supply customers with a 1099-MISC tax form when they earn more than $600 in taxable rewards throughout the year.³ Consumers may have to report this to the IRS. If below this threshold, it’s up to the consumer to calculate the amount themselves.

As a credit card rewards user, it could be a good idea to track purchases using a digital wallet to keep tabs on taxable rewards throughout the year.

Where possible, seek professional tax guidance to make sure rewards are being logged accurately.