Cashback is a type of rebate and is therefore not taxable. It is money deducted from the credit card processing fees that you have already paid, the full amount of which was already taxed on you.
@HiLine wrote:Cashback is a type of rebate and is therefore not taxable. It is money deducted from the credit card processing fees that you have already paid, the full amount of which was already taxed on you.
This is true for non deductable purchases. Where there is a tax deductable use the cashback reduces the deduction. If thd deduction is not reduced the cashback is taxable income. For instance, if you donate $10,000 to a charity and get $100 cashback you can only deduct $9,900. OTOH if you buy a bedroom set for $10,000 and get $100 cashback it is not taxable.
@cashnocredit wrote:
@HiLine wrote:Cashback is a type of rebate and is therefore not taxable. It is money deducted from the credit card processing fees that you have already paid, the full amount of which was already taxed on you.
This is true for non deductable purchases. Where there is a tax deductable use the cashback reduces the deduction. If thd deduction is not reduced the cashback is taxable income. For instance, if you donate $10,000 to a charity and get $100 cashback you can only deduct $9,900. OTOH if you buy a bedroom set for $10,000 and get $100 cashback it is not taxable.
In tax deductible transactions, the payment processing fees portion is also tax deductible, and this is why your full charity donation is tax deductible. The cashback, a part of the tax-deductible payment processing fees, is also tax deductible.
@HiLine wrote:
@cashnocredit wrote:
@HiLine wrote:Cashback is a type of rebate and is therefore not taxable. It is money deducted from the credit card processing fees that you have already paid, the full amount of which was already taxed on you.
This is true for non deductable purchases. Where there is a tax deductable use the cashback reduces the deduction. If thd deduction is not reduced the cashback is taxable income. For instance, if you donate $10,000 to a charity and get $100 cashback you can only deduct $9,900. OTOH if you buy a bedroom set for $10,000 and get $100 cashback it is not taxable.In tax deductible transactions, the payment processing fees portion is also tax deductible, and this is why your full charity donation is tax deductible. The cashback, a part of the tax-deductible payment processing fees, is also tax deductible.
Here's a good review with background by accounting pros. The currently popular cashback, as opposed to freq. flyer miles, is the current, unaddressed, fly in the ointment. The implied advice: if you don't get a 1099-MISC it's unlikely to be an issue. It's a loophole that lots of people use and so it's likely congress won't close and and the IRS won't bother with it.
@jake619 wrote:So, first tax year with a few cash reward cards. Going to see the tax lady today and I was collecting various forms and got to thinking, is the money paid back to me as a "reward" taxable or is it treated as a rebate? I'm assuming the latter but could see a case for the former.
YES. Chase sent me one of their tax form. It also stated that IRS got a copy also. 
@armbenderc wrote:YES. Chase sent me one of their tax form. It also stated that IRS got a copy also.
Was it for a cash-back card or did you take the sign-up-for-checking-account promo? I got an offer to open a Chase checking account and after X days they would deposit Y number of dollars in "for free". I didn't do it though. The fine print mentioned the bonus being taxable.