26 million people have already filed their taxes with the IRS, but you might want to check your records one last time before doing so.
Credit card rewards earned in a tax year can impact the income you need to show the IRS at the time of reporting.
Many rewards members see up to 5% to 6% back in rewards on their purchases.
Most of the time, these rewards, even thousands of dollars, are not taxable.
There are a few exceptions.
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When would my credit card rewards be taxable according to the IRS?
It doesn’t matter how you earned the rewards.
The IRS justifies this because you simply received the rewards and did not earn them.
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Three Ways Rewards Are Taxed by the IRS
- Sign-up bonus
- Tax Form 1099-INT
- Tax Form 1099-MISC
This is all mainly due to the rewards you received without doing anything to earn them.
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When credit rewards are not taxable by the IRS
- Earn rewards with purchases
- Free airline miles
It is 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 these cases, the IRS considers this as discounts and not as income.