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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: mapodile / E+ / Getty Images May 30, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Poonkulali Thangavelu is a senior writer and columnist at CreditCards.com and Bankrate, addressing debt and credit card-related legal and regulatory issues. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Bankrate logo The Bankrate promise
At Bankrate, we have a mission to demystify the credit cards industry — regardless or where you are in your journey — and make it one you can navigate with confidence. Our team is full of a diverse range of experts from credit card pros to data analysts and, most importantly, people who shop for credit cards just like you. With this combination of expertise and perspectives, we keep close tabs on the credit card industry year-round to: Meet you wherever you are in your credit card journey to guide your information search and help you understand your options. Consistently provide up-to-date, reliable market information so you're well-equipped to make confident decisions. Reduce industry jargon so you get the clearest form of information possible, so you can make the right decision for you. At Bankrate, we focus on the points consumers care about most: rewards, welcome offers and bonuses, APR, and overall customer experience. Any issuers discussed on our site are vetted based on the value they provide to consumers at each of these levels. At each step of the way, we fact-check ourselves to prioritize accuracy so we can continue to be here for your every next. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. You might have happily reaped the bounty of credit card rewards, considering issuers have been handing out this largesse liberally in the last few years. Come tax season, though, you may be wondering if you owe any taxes on such rewards. With the process of being as enticing as the prospect of a visit to a dentist for many people, this may still be a taxing question to you. How does the IRS treat credit card rewards for tax purposes? Let’s take a look at when card rewards are taxable versus when they are not taxable, and what tax filers can look out for in order to ensure their rewards aren’t taxable. When credit card rewards are taxable
Airline rewards miles could be taxable
What if a card issuer awarded you ? If they were awarded on the basis of a purchase, typically frequent flyer miles, then they would still enjoy the tax exemption. However, if your issuer awarded you bonus miles merely for , since you did not have to purchase anything to qualify and therefore are not receiving a rebate, the IRS wouldn’t consider that kosher. So you would have to pay taxes on such reward miles. Sign-up bonuses could be taxable
Keep in mind, the average that offers new cardholders $300 when they spend $1,000 in the first three months, or whatever it may be, is not considered taxable income. You are meeting a spending requirement in order to earn that sign-up bonus. However, if an issuer awarded you bonus rewards just for opening an account or without requiring any purchase or minimum spending amount to qualify, the value of such bonus is taxable. Credit card referrals could be taxable
The same applies to certain credit card referrals. If you receive a cash reward when you refer someone to sign-up for a new card, this is technically considered taxable income as well. As Scott Hallberg, tax director at Calibre CPA Group, , in case the value of such bonus miles awarded to you is $600 or more, the IRS requires the issuer to report this as income and also send you a 1099-Misc form. The credit card company will determine the value of the bonus miles. This should be somewhere embedded in the fine print of the disclosures it sent you. This holds good for , too. When credit card rewards are not taxable
If your credit card issuer offered you rewards for making purchases, the IRS considers the rewards to be a form of rebate on the purchases. Thus, the cost of the purchase is reduced and the rewards are not considered taxable income. This is akin to a store offering you, for instance, a $10 mail-in rebate after you purchase a $100 toaster. The rebate is not considered income to you, it just helps make the product more affordable and drives sales for the business. How do I know if I owe taxes on my rewards
Unless you are of rewards, odds are you don’t owe any taxes. It doesn’t matter if your rewards come in the form of cash back, miles or redeemable points, as long as you meet a spending requirement to get there, you are in the clear. You could be earning cash back on one credit card and , you are still in the clear. It doesn’t matter how much you are earning in rewards. It matters how you got there. Tread carefully when you come across credit cards that offer a bonus without spending money (or that offer rewards when you sign-up new cardholders) because that is where things can get complicated. These “no strings attached” offers may be considered taxable. While an offer that hands out a sum of money just for signing up for a new card isn’t very common, these types of offers are out there. The same goes for referrals. If you are offered money in exchange for a referral who opens up a new card, you are technically required to count these types of exchanges as income. How to avoid taxes on your rewards credit card
Most credit card rewards (no matter what form they may come in) are not taxable in the eyes of the IRS. They see these types of transactions as discounts, not taxable income. As long as you’re seeking offers that allow cardholders to earn rewards or a sign-up bonus when you meet , you are in the clear. The bottom line
You can and should take advantage of the bounty available from the Most credit card rewards are not taxable. Be wary, however, of “no strings attached” cash offers. You don’t want to be hit with any surprises come tax season. If you’re still unsure whether or not you owe taxes on your rewards, seek assistance from a tax professional or use a . SHARE: Poonkulali Thangavelu is a senior writer and columnist at CreditCards.com and Bankrate, addressing debt and credit card-related legal and regulatory issues. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer.