Cash back rebates from credit cards?

[ripvanwinkle]

Is cash back rebates and such from credit cards taxable?

[mwcpa]

Generally, for personal items purchased on personal credit cards, cash back or discounts (which is what they really are) are not taxable income.  Example, I purchase $10,000 of stuff on my Discover Card.  At the end of the year Discovers pays me back (or what ever they call it these days) $10.  The rebate whether it be in the form of a check or credit on my bill is a discount and not taxable, as my stuff really cost $9,990 now.  (think of it like a coupon)

Now, if the charges are on a business transaction the discount is actually a reduction in the price of the item purchased and that can lead to higher taxable income. Example, I use my American Express to pay for a delivery charges (let's says Fed Ex).  Fed Ex charges me $25.00.  American Express, because I am part of a loyalty program, provides me a discount of 5% on that purchase, or $1.25.  Now my "real cost" is $23.75.  I can only take a business tax deduction for $23.75 because that's all I paid.

[ripvanwinkle]

With the govt wanting every dime of stuff, I have no doubt in the future these personal cash backs will be taxable.

[mwcpa]

rip... while no one can predict what Congress will do (yet we still elect the same group year in and year out) at this point in time as I noted this is not taxable income for personal purchases on personal credit cards as they are "discounts."

[TheOtherMe]

Oct 12, 2014 15:35:21 GMT -5 mwcpa said:

rip... while no one can predict what Congress will do (yet we still elect the same group year in and year out) at this point in time as I noted this is not taxable income for personal purchases on personal credit cards as they are "discounts."

This is all that matters at the current time.  We can not predict what future Congresses will or will not do.  So much of tax law makes no sense.

[Deleted]

Frequent flyer miles and hotel points have been around for years and haven't been taxed (probably due to strong lobbying by banks and travel providers).  Let's hope cash back rewards stay that way, too.  I agree that it's not any more taxable than a Groupon or any other discount.