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Are credit card rewards taxable?

Usually, no — but there may be an exception for rewards earned from work-related credit card charges.

Credit card rewards usually aren’t taxable. But, under some circumstance, the CRA may want you to pay tax on rewards earned from charging work-related expenses to your credit card.

When are credit card rewards taxable?

As a general rule, credit card rewards are nontaxable at both the individuals and business level. This applies to cash back rewards, points and travel miles.

However, there are 3 circumstances under which employees must pay tax on credit card rewards points. According to the CRA, employees are taxed on credit card rewards points if:

  1. The rewards are converted to cash,
  2. The rewards seem to be given as part of a employee remuneration plan, or
  3. The rewards are a form of tax avoidance

If any of your rewards fall under these conditions, you must determine the fair market value of those rewards and declare it on your personal tax return as part of your income (include any GST/HST that applies, if any). Your rewards will be subject to CPP deductions. If paid out in cash, taxable rewards are also subject to EI deductions.

If your employer controls the rewards associated with the rewards card you used, then they must report the fair market value of your rewards on line 14 of your T4 slip. Learn how to calculate the value of your credit card rewards in this guide.

Why aren’t credit card rewards always taxable?

The CRA usually considers credit card rewards as discounts rather than income, and so these rewards are not taxable. This is also true of other types of monetary gifts like prize draws, lottery winnings, gifts for special personal occasions (like birthdays, weddings or religious holidays) and awards for employment-related accomplishments.

While financial disbursements that fall into the CRA’s definition of gifts, awards or discounts are not taxable, disbursements that are considered rewards are taxable. Rewards include cash, non-cash or near-cash (gift cards, securities etc.) gifts related to an employees’ work performance rather than their overall contribution to the workplace. See the CRA website for more information.

Is credit card interest tax-deductible?

How much will I be taxed on my credit card rewards?

If your credit card rewards are taxable, you simply add the amount to your other employment income on your personal tax return. The tax rate depends on how much you make as well as the province or territory in which you live.

Compare rewards credit cards

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.

Name Product Welcome Offer Rewards Purchase Interest Rate Annual Fee Min. Credit Score Description
HSBC +Rewards™ Mastercard®
30,000 Points
2x points per $1 spent
11.9%
$0 annual fee for the first year ($25 thereafter)
Min. recommended credit score: 630
Get 30,000 Points (up to $150 in value) when you spend $2,000 in the first 6 months. Plus, get the 1st year annual fee waived for the primary cardholder ($25 value). Apply by January 31, 2022.
BMO CashBack Mastercard
5% cash back
Up to 3% cash back
19.99%
$0
Min. recommended credit score: 660
Get 5% cash back on all eligible purchases in the first three months of card membership (up to max. spend of $2,000). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
Tangerine World Mastercard
15% cash back
Up to 2% cash back
19.95%
$0
Min. recommended credit score: 680
Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until November 30, 2021. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
Neo Financial Credit Card
N/A
Average 4% cash back
19.99% - 24.99%
$0
Min. recommended credit score: 600
Earn an average cash back of 4% at thousands of local and national Neo partners including most major gas and grocery stores, restaurants, gyms, coffee shops and more. Earn a guaranteed 1% cash back on all spend at non-partners.
American Express Cobalt Card
50,000 points
Up to 5x points per $1 spent
20.99%
$155.88
Min. recommended credit score: 700
Earn up to 50,000 Membership Rewards points in your first year. Earn 2,500 Membership Rewards points for each monthly billing period in which you spend $500 in net purchases on your card (up to 30,000 points). Plus, earn a Welcome Bonus of 20,000 Membership Rewards points when you spend a total of $3,000 in purchases on your Card in your first 3 months of Cardmembership.
Brim Mastercard
Up to $200 worth of bonuses
1 point per $1 spent
19.99%
$0
Min. recommended credit score: 700
Earn up to $200 worth of bonus points when you shop with Brim retailers for the first time through the Brim mobile app.
Tangerine Money-Back Credit Card
15% cash back
Up to 2% cash back
19.95%
$0
Min. recommended credit score: 680
Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until November 30, 2021. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
SimplyCash Card from American Express
4% cash back
Up to 1.25% cash back
19.99%
$0
Min. recommended credit score: 700
Earn 4% cash back on purchases (up to $200 cash back) for the first 6 months of Cardmembership.
American Express Green Card
10,000 points
1 point per $1 spent
20.99%
$0
Min. recommended credit score: 700
Earn a Welcome Bonus of 10,000 Membership Rewards points when you charge $1,000 in purchases to your card in the first 3 months as a new Cardmember.
BMO Rewards Mastercard
10,000 points
Up to 2 points per $1 spent
19.99%
$0
Min. recommended credit score: 725
Get a bonus of 10,000 BMO Rewards points when you spend $1,000 in the first 3 months. Apply by October 31, 2021 . Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
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Bottom line

Credit card rewards usually aren’t taxable unless you converted the rewards into cash, the rewards appear to be part of an employment remuneration plan or the rewards appear to be a form of tax evasion. If you’re not sure whether your credit card rewards fall into any of these categories, contact a tax professional.

Taxes shouldn’t be the only thing you consider when choosing a rewards credit card — also consider fees, interest rates, the type of rewards offered and your spending habits to find the best credit card for your needs.

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