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Are my credit card rewards taxable?

Only some forms of cash back or card rewards are subject to taxes – and your bank should send you a 1099 form for those you'll need to report on your tax return

Summary

If you’re wondering whether you should receive a 1099 form from your bank for any cash back or rewards you’ve earned during the year, fret not. Only some forms of cash back and rewards are taxable – and your bank will send you a 1099 form when they are.

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Dear Your Business Credit,

How do I get the bank to 1099 my credit card? – Victor

Dear Victor,

It’s great that you are staying on top of record-keeping in your business. Many small business owners are so busy serving customers, they neglect to keep an eye on whether they are getting the documents they need to file their taxes – and find themselves in a mad scramble as tax deadlines approach.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: Are credit card referral bonuses subject to taxes?

When card rewards are taxable – and when they are not

If you are trying to get the bank to give you a 1099 form for cash back you received from a credit card, there is nothing you need to do. Cash back is not considered taxable income, as per a memorandum 2010 from the IRS.

If, however, the bank gave you a cash bonus for opening your credit card and you are not required to make any purchases or a set amount of charges to your card, the IRS considers that taxable income. Referral bonuses (where you get friends to sign up for a card in exchange for a cash bonus) are also taxable.

It’s important to think about the impact of any income received this way on your tax status before you go after it. If, for instance, getting a few cash bonuses might push you into a higher tax bracket, it may not be worth it to make the effort to get those bonuses (or you may have to search for untapped deductions so you can go after them).

If you do have to take an action like charging $3,000 worth of purchases on the card the first three months, then the bonus is not taxable. Similarly, regular cash back is not taxable.

When your card rewards are taxable: What to expect

Banks will often automatically send you a 1099-MISC if they have given you a bonus where the 1099 form is required or, if the bank categorizes the bonus as income, a 1099-INT form. There should be nothing you need to do to prompt it.

If you don’t receive a 1099-MISC and think you should be getting one, contact your bank. You should receive one if the bonus is more than $10 if the bank has called it “interest” – or $600 if the bank considers it miscellaneous income.

When in doubt, if you think a tax document you need has not been sent, it never hurts to ask. Many companies and institutions are automating their processes and sometimes computers make mistakes, forms get stuck together in the mail or other snafus take place.

When you receive a 1099 form by mistake

You’re always better off safe than sorry when it comes to staying on top of your tax obligations – and it’s always better to take care of tax matters before they become a problem. Ultimately, you have to report all of your taxable income to the IRS, even if you don’t get a 1099 form.

At the same time, if you think you have received a 1099 form in error for income that is not taxable – or if the amount of taxable income is not reported correctly – you can contact the card issuer to request a corrected 1099. Do this promptly, by mail, so there are no delays in filing your taxes.

Tax matters can get complicated and take up a lot of time. That’s why my number one recommendation to all small-business owners is to find a great accountant as soon as you can afford one.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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Published: November 29, 2019

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