26 million people have already filed their tax returns with the IRS, but you may want to look at your records one last time before you do.
Credit card rewards earned during a tax year may have an impact on the income you need to show to the IRS when it comes time to file.
Many reward members see as much as 5%-6% back in rewards on their purchases.
Most of the time these rewards, even thousands of dollars, aren’t taxable.
There are some exceptions.
When would my rewards from credit cards be taxable according to the IRS?
It matters how you earned the rewards.
The IRS justifies this because you were simply given the rewards and did not earn them.
Three ways rewards are taxed by the IRS
- Sign up bonuses
- Tax form 1099-INT
- Tax form 1099-MISC
These are all mainly due to rewards you received without doing anything to earn them.
When credit rewards are not taxable by the IRS
- Earning rewards with purchases
- Free air miles
It’s not common to be taxed for credit rewards.
Most of the time there is a spending requirement to get the rewards in the first place.
In those cases the IRS views that as discounts and not income.