topic Re: Is money from cashback taxable income? in Credit Cards

Is money from sign-up bonus taxable income?

Guava — Sun, 25 Dec 2011 18:21:33 GMT

Hai all, I was talking with a family member yesterday about these credit cards' signup offers, and that I was approved for the freedom w/ $300 back bonus. He said in the upcoming tax season, the bank would send me a W-2 and I'd be taxed for it. Is this true?

Wish you all a wonderful Christmas day

Re: Is money from cashback taxable income?

steve23111 — Sun, 25 Dec 2011 16:25:20 GMT

It's always best to consult a "tax professional" (which I am not) but the short answer is... probably not, as they are considered a rebate on a purchase, which is not considered income, according to this article from the usually-pretty-trustworthy web site, Consumerist: http://consumerist.com/2010/02/are-credit-card-rewards-taxable.html

There are a number of other postings around the Internet that conclude the same thing: "probably not."

Re: Is money from cashback taxable income?

SimonP — Sun, 25 Dec 2011 17:11:25 GMT

My rule of thumb is if the bank doesn't provide you with the paperwork then it is not taxable

I always receive proper and detailed documents for my saving accounts to include into my tax return at end of the year, but I never receive such documents for rebates and rewards.

Re: Is money from cashback taxable income?

trumpet-205 — Sun, 25 Dec 2011 17:50:48 GMT

Nope. It is not taxable. Cashback means you are getting what was yours before back.

Generally I prefer statement credit or giftcard, to avoide any paper trace.

Re: Is money from cashback taxable income?

Guava — Sun, 25 Dec 2011 18:21:02 GMT

Thanks for the replies guys. However, I apologize I didnt state my question correctly, like what I had in my head at the time.

I meant to ask is the credit card signup bonus taxable? Would I have to pay tax on the $300 bonus from the freedom approval for example? Thanks much

Re: Is money from cashback taxable income?

Anonymous — Sun, 25 Dec 2011 18:51:42 GMT

I don't think they can tax "points".. *shrug*

Re: Is money from cashback taxable income?

Anonymous — Sun, 25 Dec 2011 19:45:10 GMT

no, it is not taxable income. However, if you sign up for a checking account bonus, such as the $100 ones from Chase, the bank will send you a 1099-INT at the end of January and you will have to report it to the IRS.

Re: Is money from sign-up bonus taxable income?

Anonymous — Sun, 25 Dec 2011 23:05:38 GMT

I thought it had to be in an amount over $600 in order to be taxed.

Re: Is money from sign-up bonus taxable income?

Guava — Sun, 25 Dec 2011 23:32:37 GMT

Thanks guys! Seems like credit card bonus isn't taxable, and I certainly hope so.

Re: Is money from sign-up bonus taxable income?

steve23111 — Mon, 26 Dec 2011 00:17:32 GMT

@Anonymous wrote:
I thought it had to be in an amount over $600 in order to be taxed.

All interest income is taxable, and you will receive a 1099-INT for cumulative interest income over $10 in any given institution. Bonuses and perks related to checking and savings accounts are considered interest income.

Re: Is money from sign-up bonus taxable income?

llecs — Mon, 26 Dec 2011 05:28:29 GMT

I would think that a 1099-MISC for miscellaneous income could be generated, but it doesn't have to be filed unless that $600 threshold is met. Of course, all income must be declared on your 1040.