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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®
20,000 Points
2x points per $1 spent
11.9%
$0 annual fee for the first year ($25 thereafter)
Min. recommended credit score: 630
Get 20,000 Points (up to $100 in value), plus get a 1st year annual fee waiver. Apply by September 27, 2021.
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
10% cash back
Up to 2% cash back
19.95%
$0
Min. recommended credit score: 680
Earn an extra 10% cash back (up to $100) when you spend $1,000 on everyday purchases within the first 2 months. Until August 16, 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).
American Express Cobalt Card
30,000 points
Up to 5 points per $1 spent
19.99%
$120
Min. recommended credit score: 700
Earn up to 30,000 bonus Membership Rewards points in your first year as a new Cobalt Cardmember.
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
10% cash back
Up to 2% cash back
19.95%
$0
Min. recommended credit score: 680
Earn an extra 10% cash back (up to $100) when you spend $1,000 on everyday purchases within the first 2 months. Until August 16, 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).
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.
Choice Card from American Express
10,000 points
1 point per $1 spent
19.99%
$0
Min. recommended credit score: 700
Earn 10,000 Bonus Membership Rewards points within 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.
BMO World Elite Mastercard
30,000 points
Up to 3 points per $1 spent
20.99%
$0 annual fee for the first year ($150 thereafter)
Min. recommended credit score: 760
Get up to 30,000 points and the $150 annual fee waived in the first year. Apply by October 31, 2021
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Compare up to 4 providers

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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