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Credit card issuers are paying out more and more in rewards every year. American Express, Discover and Capital One spent a combined $12.9 billion on reward payments in 2017, a 59% increase from 2011.
And while you may have your rewards credit card to thank for free airfare or a complimentary hotel night stay in 2019, some of those perks might actually cost you extra when you pay your taxes.
https://www.cnbc.com/select/are-credit-card-rewards-taxable/
I think it depends on how the rewards are received. Most rewards are earned through the use of the card itself; for example, receiving one reward point for every dollar spent on a card. These rewards are considered rebates. However, rewards provided as an incentive for opening an account could be considered taxable income.
@Tuscani wrote:I think it depends on how the rewards are received. Most rewards are earned through the use of the card itself; for example, receiving one reward point for every dollar spent on a card. These rewards are considered rebates. However, rewards provided as an incentive for opening an account could be considered taxable income.
+1
I did get a 1099 for the Sapphire Checking bonus.
Then again, even though that's on top of my already non-trivial tax payment, laughing all the way to the bank with the GFE that Chase gave me for my Texas adventure and as such I don't even care haha.
That would wind up opening a whole can of worms, and possibly redcue the point system to useless for some.
Just imagine if a person had to pay taxes on a $5K flight that was redeemed via points. How many people would be irate ove this?
Cheese and Crackers! Will it ever end?
The IRS considers points as purchases on discounts and therefore does not consider them income. Wonder how long before they go after this.
The problem is there's no set Dollar value on points, unless we count cash back percentages. yet that is used as a statement credit, I don't think they would go after someone until they start seeing physical Money change hands. Even then it would be relatively small amounts, and not worth cracking down on. Considering there preobably busy enough with actual tax evasion cases etc.
@wa3more wrote:The IRS considers points as purchases on discounts and therefore does not consider them income. Wonder how long before they go after this.
I've seen discussions about this on FT going back close to 20 years and congress has not seen fit to make any tax law changes that I'm aware of during that time.