Are Credit Card Rewards Taxable?

Most credit card rewards are not taxable when you earn them by making purchases. The IRS generally treats cash back, points, and miles earned through spending as rebates or discounts rather than income. However, some bonuses you receive without having to make purchases may be taxable.

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Are Credit Card Cash Back Rewards Taxable?

No, cash back earned from purchases generally is not taxable. The IRS generally treats these rewards as a rebate on what you spend, rather than as income.

For example, if you spend $1,000 on a credit card and earn $20 in cash back, that $20 is generally considered a discount on your purchases. You normally do not have to report it as income on your federal tax return.

Are Credit Card Points and Miles Taxable?

Points and airline miles earned by making purchases with your credit card generally receive the same tax treatment as cash back. They are usually considered rebates or discounts, not taxable income.

This generally applies to rewards earned through everyday spending and sign-up bonuses that require you to meet a spending requirement.

When Can Credit Card Rewards Be Taxable?

Credit card rewards may be taxable when you receive them without having to make purchases. For example, a bonus awarded simply for opening an account, with no spending requirement, may count as taxable income.

Referral bonuses can also be taxable because you may receive the reward for referring someone rather than for making purchases yourself.

The important distinction is how you earned the reward. A bonus tied to qualifying purchases is generally treated differently from one received without a spending requirement.

Do You Have to Report Credit Card Rewards on Your Taxes?

You generally do not report ordinary cash back, points, or miles earned through purchases as taxable income. If you receive a reward that qualifies as taxable income, however, you may need to report it on your federal tax return.

Do not assume that a reward is tax-free simply because the credit card company did not send you a tax form. Whether you must report taxable income depends on the applicable tax rules, not solely on whether you receive a form.

If you receive a substantial bonus and are unsure how it should be treated, check the issuer's tax documentation or consult a qualified tax professional.

Are Credit Card Rewards Taxable? The Bottom Line

Credit card rewards earned through spending generally are not taxable, but some rewards received without spending may be. Cash back, points, and miles earned from purchases are usually treated as rebates. Bonuses for opening an account without a spending requirement and referral rewards may be taxable income.

If you are unsure about a particular reward, check how you earned it and review the applicable tax guidance before filing your return.