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Are Credit Card Rewards Taxable?

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taxesCredit card rewards can feel like income, but they are not. Reward credit card users can earn points, miles, and cash back when they sign up for a new card and when they use their card for spending. But are these rewards taxable? The clear consensus is no.

Why credit card rewards are not taxable

To earn credit card rewards, cardholders need to spend money. And of course, the rewards earned are never as valuable as the money spent. Therefore, these rewards do not represent income, but rather a discount on a purchase. And thankfully, Uncle Sam only considers income taxable, not discounts. Otherwise, we would have to tabulate every coupon we used and the value of every sale we took advantage of.

When bank rewards are taxable

Unlike credit card rewards, banks can report as taxable income incentives received from opening a retail checking or savings account. For example, some banks will offer $1o0 or more to those who open up a new account, much like they once offered free toasters. But eventually, taxpayers will receive a 1099-Misc form indicating interest earned that is reported to the IRS.

And while technically these rewards are not interest, it still represents income earned from a bank account and is considered taxable. In fact, Citi has even taken the controversial step off issuing 1099-Misc forms to those that earned airline miles from some of their retail accounts. But thankfully, there have been no reports of Citi or any other credit card issuer reporting points, miles, or cash back as income.

So do not be afraid to maximize the value of credit card sign up bonus or rewards from spending. So long as cardholders do not spend more to earn rewards, and they pay their balances in full, these credit card rewards are just money in the bank that the IRS won’t touch.

Editor's Note: This content is not provided by Citi. Any opinions, analyses, reviews or recommendations expressed here are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by the Citi or any of the other companies whose products are featured in this content.

About the author

Jason Steele

Jason Steele is a freelance journalist specializing in personal finance and travel and is recognized as an expert in credit cards. He is a regular contributor to many of the top personal finance sites such as Wise Bread and Money Talks News. His work has been frequently carried on mainstream news outlets such as MSN Money, Yahoo, Finance, and Business insider.

Jason lives in Denver Colorado with his wife and two daughters.

– has written 350 posts.

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