1099 for credit card rewards?

[Colleenz]

Can someone remind me again if I need to declare the cash rewards from my credit card as income and will Case send a 1099?

Thanks!

[frep]

Generally no you don't need to declare cash rewards from a credit card but I believe it depends on what you use the card for. If you donate $1000 to a charity and that goes on your card and you claim the $1000 on schedule A as a deduction I think you're supposed to reduce the $1000 by the cash reward. If you got 1% cash back then you should only claim $990 instead.

[rangerj]

While these "discounts" are called "rewards" they are not in fact "awards" or "Prizes" in the "tax" sense of the word. Like the cash back discounts on automobiles the credit card rewards are simply discounts and are not taxable income. As stated above, if the purchase is an item of tax deduction then the amount deducted has to be adjusted for the discounted price.
Added thoughts: Where the credit card is used for business expenses the expenses may be recorded, that is deducted, at face value and the discount (reward) reported as income.

[mwcpa]

to add... if the card was a "business" only credit card then any "reward" is in effect income by virtue of their being a lower expense cost.

Example, My business uses Fed Ex and the use is charged using American Express. American Express, through my agreement, gives me back 5% of that charge in the form of a discount. My "expense" is not the 100.00 on the swipe when I shipped the package, it is 95.00 when reduced by the 5% give back.

[Deleted]

Ok, but if the business card just gives rewards, you don't have to count that? So sometimes the rewards would be potentially better than cash back...?

[mwcpa]

"Ok, but if the business card just gives rewards, you don't have to count that? So sometimes the rewards would be potentially better than cash back...? "

No, that is either income or a reduction in an expense.....under the law, any enrichment to wealth is income unless expressly excluded by law.... finding a $50 bill on the floor is technically taxable income... the same as your salary or a dividend...

What kind of rewards are you talking about... the "free toaster" to open a bank account is income...

The IRS has pretty much given in on the "frequent flyer miles" issue....

[grits]

For every $20 you charge on your GM Card, GM gives you $1 in rewards towards the purchase of a new GM vehicle. Would it be considered income before you use it as the discount, after you use it or both?

[Colleenz]

Will I get a 1099 for the cash award to open a new checking account ? (It was $100).

Thanks for all of the awesome replies!

[mwcpa]

"For every $20 you charge on your GM Card, GM gives you $1 in rewards towards the purchase of a new GM vehicle. Would it be considered income before you use it as the discount, after you use it or both?"
If this was for "non-deductible" person items this is a "discount" not taxable income. If this was for a "deductible" expense, then the expense should be reduced for the discount or when the discount is used the amount attributable to such expenses is taxable income.

"Will I get a 1099 for the cash award to open a new checking account ? (It was $100)."
Yes, and it will be called "interest income"

[rangerj]

Back in about 1975 the IRS issued a Revenue Ruling concerning the "gifts" banks were giving to customers who opened new accounts. For a certain amount you could get a TV, or a toaster. In Texas you could get a new rifle or a shot gun for $X amount. Bottom line these "gifts" were ruled to be taxable interest (prepaid)income. Can you immagine a bank giving a gun as a gift today? Zounds, as old Bill S would have said.

[TheOtherMe]

Rifles were given by a bank in Boulder, CO back in the olden days. They were issuing 1099's.

[grits]

Jan 14, 2013 19:10:55 GMT -5 mwcpa said:

"For every $20 you charge on your GM Card, GM gives you $1 in rewards towards the purchase of a new GM vehicle. Would it be considered income before you use it as the discount, after you use it or both?"
If this was for "non-deductible" person items this is a "discount" not taxable income. If this was for a "deductible" expense, then the expense should be reduced for the discount or when the discount is used the amount attributable to such expenses is taxable income.

"Will I get a 1099 for the cash award to open a new checking account ? (It was $100)."
Yes, and it will be called "interest income"

I have been taking the viewpoint of when the discount is used.  I know if I use a discount voucher for $3000 off a new car, I will probably have to pay some form of tax on it.  So far I have received no benefit from their so-called rewards points, and probably never will.

[Deleted]

Jan 14, 2013 9:48:12 GMT -5 Colleenz said:

Can someone remind me again if I need to declare the cash rewards from my credit card as income and will Case send a 1099?

Thanks!

Colleenz,

This might helps.


With our Discover Miles Card, you earn mileage points," says spokesman Matthew Towson. "Every 10,000 miles you earn can be redeemed for $100 off an airline ticket or miles can be redeemed for gift cards." He added: "The cash back bonus a card member receives is not taxable according to the tax code. It is, in effect, considered a rebate, so there are no tax implications."

Read more: www.creditcards.com/credit-card-news/irs-taxable-income-credit-card-rewards-points-gift-1277.php#ixzz2JBOpSMrb 
Compare credit cards here - CreditCards.com