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Credit card rewards usually aren’t taxable. But make sure to watch out for select instances where rewards could be considered taxable income.
Credit card rewards are nontaxable when you earn them through card purchases, or when you meet spend requirements to earn a bonus. They may be taxable if you earned them without having to meet any spend requirement.
For example:
| How you earned your rewards | Rewards taxable? |
|---|---|
| You made purchases with your credit cards and earned corresponding rewards. | No |
| You earned a signup bonus upon meeting a spend requirement. | No |
| Your provider gives you rewards for opening or switching an account. | Yes |
Credit card rewards are usually considered rebates rather than income, and are not taxed.
The exception is if you received rewards outside of your normal spend or without having to meet spend requirements. In this case, your rewards are considered taxable income.
Business credit card rewards may be taxable if you receive them outside of normal spending or without having to meet spend requirements. In this sense, they’re similar to personal-card rewards for tax purposes.
There is an interesting quirk with business cards, however. You must eliminate the value of rewards when claiming deductions — both when you use rewards for redemptions and when you earn rewards for qualifying spending. For example:
The amount you’re taxed on your rewards depends on how your card provider classifies them, as well as which 1099 form you’re sent.
Note that even if your provider doesn’t send you a 1099 form, you must report your rewards on your return if they’re considered income.
Read our guide to filing your taxes online, including tax brackets to help you figure out how much you owe.
These are owed by self-employed individuals — for example, freelancers and small-business owners — and are used to fund Social Security and Medicare.
As mentioned above, credit card rewards usually are nontaxable. That said, don’t let taxes stop you from getting the card you want. Here are a few great credit card options for rewards.
Credit card rewards usually aren’t taxable. But they can be, if your card provider offers you rewards unrelated to your spending or without you having to meet spend requirements. If you’re ever in doubt, contact a tax professional.
Credit card taxes typically won’t be your biggest concern — rather, it’s best to choose the right rewards card for your needs and spending habits.
Business loan interest rates dropped in 2020 and are likely to stay low. Here’s why.
A youth savings account with a whopping 7% APY on account balances up to $1,000.
Get a low rate guarantee, but you won’t know if you’re eligible until you apply.
Get a line of credit with low closing costs — but you can’t apply online.
A kids’ savings account with a generous interest rate that transitions to a lackluster regular savings account when your child turns 18.
A checking account-debit card combo marketed for people with disabilities.
Bank of Missouri’s Show Me Savers earns 0.1% APY but can’t be opened online.
It’s easy to qualify for these online store cards.
A checking account that earns up to 1.75% APY and up to $25 in ATM reimbursements.
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