!Today, we address a common question that often arises when it comes to credit card rewards: Are they taxable?
Rewards That Are Considered Income:
- Bank account signup bonuses are considered interest income and may be taxed.
- “Refer-a-Friend” bonuses are issued in exchange for a service and are taxable.
- A 1099-MISC form may be received from the institution for taxable bonuses, summarizing the income earned.
Rewards That Are Not Considered Income:
- Most points and miles earned are not considered income and are not taxable.
- Rewards earned from credit cards, including welcome bonuses, are generally considered rebates or discounts.
- A new U.S. Tax Court (Anikeev v. Commissioner) ruling states that credit card rewards can be taxed in certain circumstances involving large amounts of manufactured spending for the sake of the rewards.
- Miles earned from personal travel are treated like credit card rewards and are not taxable.
- The IRS (Announcement 2002-18) does not treat Miles earned from business or government travel as income.
Let’s talk. Book your free assessment here to make sure your income is handled correctly!