Are Credit Card Rewards Taxable?

Another frequent question that comes up in the credit arena is, “Are credit card rewards taxable?”

With all these rewards cards around, it’s no wonder consumers are concerned that they may be taxed for things like free airline tickets and cash rewards.

But credit card rewards aren’t income, and are in fact a type of rebate; the card issuers even refer to them as such.

If you think about it, by electing to use your credit cards to make purchases you could be making with cash or a debit card, you are receiving a price reduction or discount from the card issuers.

While it’s not as direct as normal rebates, which typically come from the manufacturer, it draws enough parallels to be treated similarly.

As a result, you shouldn’t worry about paying taxes on credit card rewards, as they’re just a discount you receive for using your credit card.

Unfortunately, the IRS hasn’t made it 100% clear if that’s indeed the case, so questions and worries still linger.

I did a search over at the IRS website and couldn’t find anything that addresses this question specifically.

Funnily enough, the IRS actually promotes the use of a credit card to file electronically, noting that you could even earn miles, points, rewards or cash back from card issuers.

American Express lists their cash back reward under fees and adjustments, so again, it doesn’t appear to be income.

That’s the way I’m treating it unless I hear otherwise, though I would expect an advisory regarding the topic in the near future as rewards become more commonplace.

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