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Are My Credit Card Rewards Taxable?

Between cash back, credit card points and travel miles, customer rewards have become a popular way to save money and drive business. If you’ve racked up rewards points you’re ready to spend, you might be wondering if you need to declare them on your taxes.

Generally, you won’t be required to pay taxes on credit card rewards you earn. The IRS usually views cash-back and points as a refund, or rebate, which doesn’t require taxation. 

However, this definition can change depending on the type of rewards you earn, and some customer reward programs might still be classified as taxable income. Before you skip this part of your taxes, it’s important to understand whether the specific points you’ve earned can be classified as income. 

What Rewards Are Considered Income? 

The type of rewards you earn determine whether you’ll have to pay taxes on them. Here’s a look at some common rewards incentives that are considered taxable income. 

Sign-up bonuses

Banks and credit card companies sometimes offer perks that incentivize new customers to try their products. When you open a new line of credit, they might throw in a sign-up or welcome bonus to get your account started on the right foot. 

Because this extra cash comes as a sign-up bonus, rather than the result of a purchase, the IRS considers these rewards as taxable income. These bonuses can come in the form of cash or points, but you’ll still be required to pay a percentage of the amount in taxes. 

Most credit card points are valued at 1 cent per point. If you received 10,000 points as a sign-up bonus, that would add up to $100 of taxable income. 

You’ll likely receive a 1099-INT from your financial institution documenting the bonus for your financial records. It’s your card issuer’s responsibility to provide this documentation, so you won’t need to track your rewards or calculate their value on your own. 

Referral bonuses

Similar to sign-up bonuses, the perks you earn when referring a new customer to a bank will also count as income. In these instances, the IRS views the bonus as a commission, which is offered in exchange for providing the bank a service. 

When you refer a friend to a bank or credit card, you’re helping that financial institution acquire new business. You’re then “paid” a bonus as a result. Since nothing was purchased to earn the reward, and it requires no expense on your end, it will still count as taxable income.

Again, you won’t need to track these rewards on your own. Your credit card company will send you a 1099 that identifies what you’ve earned and how much you’ll owe the IRS. 

What Rewards Are Not Considered Income? 

When you earn points as the result of a purchase, those rewards usually won’t apply to taxes. Let’s take a look at some examples of these credit card rewards, so you can be prepared the next time tax season comes. 

Credit card reward points

For anyone with a credit card, points offer an easy way to save money while building credit.

When enough points are earned, they can be exchanged for product discounts or used to pay down existing debt. Though these points act as a form of currency, they’re earned as the result of a purchase. Therefore, they’re not viewed as income by the IRS. 

Additionally, some credit card issuers offer sign-up bonuses that only kick in after the cardholder spends a certain amount. In this case, the bonus would also be seen as a refund, since the user had to reach a spending requirement to earn the reward. As discussed above, bonuses that come into an account automatically, without necessitating a purchase, will be considered taxable income. 


As the name suggests, cash-back involves earning money in exchange for buying certain items. Calculated as a percentage of the overall purchase price, cash-back rewards are usually sent to the customer as a mailed check, gift cards or direct deposit. 

Much like credit card points, cash-back is a form of rebate. When received in relatively small amounts, the IRS won’t consider this taxable income. 

Travel miles

One of the easiest and most convenient ways to earn discounts with a credit card is by building up travel rewards. For frequent flyers, shaving off a few bucks from their airline or hotel bill can mean serious savings in the long term. 

Like with credit card points, you can only earn travel and airline miles by making other purchases. These rewards are earned as a result of something you already paid for, so travel and airline miles are rarely taxable. 

Do You Need a 1099 for Credit Card Rewards? 

If the rewards you’ve earned are considered taxable income, like with a sign-up or referral bonus, you’ll need a 1099 for your personal records. 

1099s provide a record of interest income that the IRS views as taxable. When you earn income from referring clients to a business, that institution is required to provide you with a 1099. 

Since sign-up and referral bonuses are considered income, the credit card company is responsible for sending 1099s to customers who earned those rewards. Once the 1099 is received, the customer has the documentation they need to file and pay their taxes accurately. 

These forms are usually issued automatically. If you’ve received income through rewards and believe they’re taxable, make sure you receive your 1099. If one doesn’t come, reach out to your credit card company and request a copy ahead of tax season. 

Are Business Credit Card Rewards Taxable?

For small business owners, rewards earned on a business credit card follow the same general rules. In some instances – such as with points, cash-back or travel miles – businesses won’t need to report rewards as income on their taxes and can use them to save on business expenses. 

Sign-up or referral bonuses, which can be larger when referring entire companies to a financial institution, will require you to pay taxes. As with the average cardholder, your financial institution will provide the necessary tax documentation, should the rewards you earn require a tax payout from your small business. 

Tax-Free Savings

Since credit card rewards are mostly untaxed, they offer a great opportunity to save money without the IRS spoiling the fun. If you’re still uncertain about whether the rewards you’ve earned are taxable, ask a tax professional or contact your credit card company for more information.

The Short Version

  • The type of rewards you earn determine whether you’ll have to pay taxes on them
  • When you earn points as the result of a purchase, those rewards usually won’t apply to taxes
  • If the rewards you’ve earned are considered taxable income, like with a sign-up or referral bonus, you’ll need a 1099 for your personal records
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