Are Credit Card Rewards Taxable? | Finder Canada

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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.

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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 holiday) 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 Purchase Interest Rate Cash Advance Rate Annual Fee Minimum Income Benefits with this card Description
American Express Cobalt Card
19.99%
21.99%
$120
N/A
Earn 5 Membership Rewards points per $1 spent at eligible grocery stores, restaurants, bars, cafés and food delivery services, 2 points per $1 spent at eligible gas stations, and on transit and travel purchases, and 1 point per $1 spent elsewhere.
Earn up to 45,000 bonus Membership Rewards points. In your first year as a new Cobalt Cardmember, earn 2,500 points for each monthly billing period in which you spend $500 on your card (for a total of 30,000 points in a year). Plus, earn 15,000 points when you spend a total of $3,000 in purchases on your Card in your first 3 months. Apply by May 5, 2021.
BMO World Elite Mastercard
19.99%
22.99%
$0 annual fee for the first year ($150 thereafter)
$80,000
Get 3 BMO Rewards points per $1 spent on eligible travel, dining and entertainment purchases (up to $50,000 spend annually), and 2 points per $1 spent on all other eligible purchases (and once you reach the $50,000 annual spend).
Get up to 30,000 points – 25,000 points when you spend $3,000 in the first 3 months and 5,000 points on your first anniversary. Plus, get the $150 annual fee waived in the first year. Apply by October 31, 2021
American Express Aeroplan Card
30% annual interest rate applies to balances not paid in full each month
N/A
$120
N/A
Earn 2x the points on eligible purchases made directly with Air Canada and Air Canada vacations, 1.5x the points on eligible dining and food delivery purchases and 1x the points on everything else.
Earn up to 15,000 Welcome Bonus Aeroplan points and a bonus Buddy Pass as a new cardmember.
SimplyCash Preferred Card from American Express
19.99%
21.99%
$99
N/A
Earn 2% cash back on all eligible purchases
Earn 10% cash back on all eligible purchases (up to $400 in cash back) for the first four months of Cardmembership.
Tangerine Money-Back Credit Card
19.95%
19.95%
$0
$12,000
Earn 2% cash back in two categories of your choice (or three categories if you open a Tangerine Savings Account and directly deposit your cash back into the account), and 0.5% cash back on everything else.
Get a 1.95% interest rate on balance transfers for the first six months (valid within the first 30 days of account opening).
BMO eclipse Visa Infinite
20.99%
23.99%
$0 annual fee for the first year ($120 thereafter)
$60,000
Earn 5x the BMO Points for every $1 spent on groceries, dining in and out, gas and transit.
Get up to 40,000 points and the $120 annual fee waived in the first year. Earn 25,000 points after you spend $3,000 in the first 3 months and get 15,000 points on your first anniversary.
Choice Card from American Express
19.99%
23.99%
$0
N/A
Earn 1 American Express Membership Point for every $1 you spend on purchases.
Earn 12,500 Bonus Membership Rewards points when you charge $1,250 in purchases to your card within the first 3 months as a new Cardmember. Apply by May 5, 2021.
American Express Business Edge Card
19.99%
21.99%
$99
N/A
Earn 3 Membership Rewards points for every $1 spent on eligible business essentials including office supplies, electronics, rides, gas, eats and drinks (up to an annual earn of 75,000 Membership Rewards), and earn 1 Membership Reward point for every $1 spent on all other eligible purchases
Earn up to 42,000 Membership Rewards points in your first year. Earn a Welcome Bonus of 30,000 Membership Rewards points when you spend at least $5,000 on eligible purchases within the first three months, and earn 1,000 Membership Rewards points each month (a total of 12,000 annually) when you spend a minimum of $3,000 on eligible purchases
American Express AIR MILES Platinum Credit Card
20.99%
21.99%
$120
N/A
Earn 1 AIR MILE for every $5 spent on eligible food, drink, gas and transit purchases (up to an annual spend of $30,000), and earn 1 AIR MILE for every $10 spent on all other eligible purchases (and after the $30,000 annual spend)
Earn a Welcome Bonus of 2,000 AIR MILES when you spend at least $1,500 in eligible purchases within the first three months. That’s enough to redeem for $200 towards your purchases with AIR MILES Cash.
American Express Aeroplan Reserve Card
19.99%
21.99%
$599
N/A
Earn 3x the points on eligible purchases made directly with Air Canada and Air Canada Vacations, 2x the points on eligible dining and food delivery purchases in Canada, and 1x the points on everything else.
Earn up to 65,000 Welcome Bonus Aeroplan points and a $100 Statement Credit as a new cardmember.
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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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