Understanding the Tax Implications of Credit Card Rewards

Are Credit Card Rewards Taxable?

Rewards are one of the main benefits of shopping with a credit card, but the IRS could consider them taxable income. Here's what you need to know.

How the IRS treats credit card rewards

Most credit card rewards programs work the same. You use the card to make purchases and you earn points or miles.

Welcome bonuses are generally not considered taxable income either because there is a spending requirement new customers must meet to obtain the bonus.

Business owners may be an exception

Business owners also have to be careful about credit card rewards when tracking their deductible business expenses. You’re allowed to write off the cost of goods and services you need to run your business.

What to do if you owe taxes on your credit card rewards

It's rare to owe taxes on your credit card rewards, but if you do, you'll need to report it on your taxes.