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March 7, 2019
In this day and age, most credit cards come with benefits. They have cash back incentives, sign-up bonuses, referral bonuses, and many other ways to attract new customers. At first glance it’s great; you’re reaping in the benefits and life is good. But have you ever stopped and asked yourself, “Is this taxable?”
The answer is: it depends.
It really comes down to one factor — were those benefits earned or given?
If you have a credit card that offers cash back, or an introduction bonus that requires you to spend money to get money back, i.e. spend $500 in the first three months and get $150 back, then those benefits are not taxable. Since it required you to spend money, those benefits are considered to be earned.
However, if you received a bonus for referring a friend to a card or for opening up a new checking account, then those benefits are taxable. Since you didn’t have to spend a dime, those benefits aren’t considered earned, rather given.
One surefire way of knowing whether it’s taxable or not is if you receive a 1099-MISC from the bank. That is income you will have to pick up on your tax return.
If you ever have any doubts, do not hesitate to contact your accountant. It’s always important to consider these extra sources of income.