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Are Credit Card Rewards Taxable?

Most credit card rewards aren't taxable if you’re spending money to earn them.

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Credit card rewards can be quite lucrative if you use a rewards credit card tailored to your spending habits. Depending on the card, you can earn cash back, airline miles, welcome bonuses, referral bonuses and more. This can equate to some serious return if you use your card strategically. But are these rewards considered taxable income? In most cases, no, though there are exceptions.

Credit card rewards points and cash back are generally considered a promotional benefit or rebate and are not taxable,” said David Shipper, a senior research analyst for Aite-Novarica Group, who specializes in debit, credit and prepaid card issuance. “However, there are situations where rewards might be regarded as taxable income.” 

Not every situation is as clear-cut, so if you have questions about whether your credit card rewards are taxable, reach out to a tax consultant (or a tax software program). Read on to learn when credit card rewards may be considered taxable income.

Types of credit card rewards

Rewards credit cards generally offer rewards in the form of cash back, points or miles.

Travel credit cards help you earn points or miles on eligible purchases that you can typically redeem for flights, hotels, car rentals and so on. Some travel credit cards are co-branded with a specific airline or hotel loyalty program, making it easier for hotel and airline loyalists to earn rewards and benefits within a program they’re likely already familiar with. 

Cash-back credit cards offer a straightforward way to earn cash back on everyday purchases. There are four different categories of cashback cards, including flat-rate, tiered, rotating bonus categories or choose-your-own category. Flat-rate cash-back cards offer the same rewards rate on every eligible purchase. Tiered cash-back cards offer different rewards rates for different categories of spending. For example, you may earn 6% cash back at supermarkets but only 3% on US gas station purchases. 

Cash-back credit cards with rotating bonus categories offer higher rewards rates in specific categories that typically rotate quarterly. You may have to manually activate these bonus categories to earn the higher rate. And lastly, some cash-back cards let you choose your rewards category on a monthly basis, making it easier to tailor your card’s rewards rate to your spending habits.

While the rewards currency may vary, rewards cards work the same way -- you earn rewards after you use your card on purchases. Since you have to spend to earn a return, any rewards accrued from your spending is generally exempt from taxation.

When your credit card rewards are not taxable

Most credit card rewards earned by meeting a spending requirement are not considered taxable income. If you collect $200 in cash back for spending $1,500 in the first three months from account opening, for example, that wouldn’t be considered taxable -- because of the spending requirement. That goes for airline miles, cash back and redeemable points, the three most prominent credit card rewards categories. For example, if you earn 5 miles for every dollar you spend on flights with your travel credit card, those miles aren’t considered taxable income. You have to spend money to earn money in this scenario, so you’re in the clear. And it doesn’t change based on how much you earn in rewards, either. 

“In general, the US government considers any income taxable, but there is no defined law that states what’s considered income when it comes to credit card rewards,” said Jim Pendergast, senior vice president and general manager for the altLINE division of The Southern Bank Company. “Many rewards are considered discounts instead of income, making them nontaxable.” 

For example, in 2013 and 2014, physicist Konstantin Anikeev and his wife earned more than $310,000 in credit card rewards using an American Express card. Because the IRS states credit card rewards earned through spending are not taxable, the couple did not end up owing taxes on their earnings after a lawsuit reached a split decision in 2021.

But the rules change when you receive a reward that’s not attached to a spending requirement.

When your credit card rewards are taxable

No-strings-attached credit card offers are few and far between, but they do exist. If you earn rewards with your credit card without having to spend any money,  the money you receive may be taxable. For example, if you receive cash or miles for simply opening up your account and there’s no spending requirement to earn the reward, that money may be considered taxable income. 

The same applies to referral bonuses. Some issuers reward cardholders for inviting their friends or family members to apply for a card. Every issuer has its own rules surrounding referral bonuses, but you generally receive a bonus once your referral gets approved for the card. If you receive a monetary bonus for recruiting someone who opens a card, you’d technically be required to report that as earnings on your income taxes.

However, Shipper also notes that there is a gray area. “If you redeem business card rewards for a personal vacation, then the rewards may be seen as income and could be taxable. Or if you attempt to ‘beat the system’ and purchase money orders or gift cards that are then used directly or indirectly to pay off the credit card, your rewards gains may be taxable,” Shipper said.

Do card issuers send 1099s for taxable rewards?

If you earn taxable credit card rewards or cash back, you may need to file a 1099-MISC form with your tax return. A 1099 is an official IRS form that proves a business paid a nonemployee. In this case, your credit card company would be the business and you’d be the nonemployee.

The IRS requires a 1099 form when income exceeds $600 or more. If you earn $600 or more in taxable rewards, you may receive a 1099 from your credit card company. If you earn less, you’ll still need to report this information on your tax return, but you won’t receive a 1099. Instead, you should review your statements for the prior year to calculate how many taxable rewards (referrals or bonuses earned without a spending requirement) you’ve earned. If you aren’t sure whether your credit card rewards are taxable, you should contact a tax consultant for further guidance. 

Pendergast and Shipper both expect the IRS to increase its scrutiny of credit card rewards in the future, so it’s a particularly good idea to double-check your status before filing your taxes.

How do I know if I owe taxes on credit card rewards?

Unless you’re collecting a serious number of referral bonuses, you probably don’t owe taxes on your credit card rewards. Again, you don’t have to pay taxes on offer rewards -- whether they come as points, airline miles or cash back -- as long you earned them through spending. And there’s no restriction on how much you can earn, as long as you’re spending money to earn money, so to speak.

If you earn a bonus from your credit card simply for signing up or referring a friend or family member, you might have to pay taxes on that income. These offers are less common, but they are out there, so make sure you keep track of any taxable rewards, so you’re prepared when tax season rolls around.

The bottom line

Earning credit card rewards typically doesn’t trigger a taxable event because the IRS treats card rewards as a rebate, not a source of income. However, things can get more complicated if you habitually refer new cardholders or take advantage of no-strings-attached credit card offers. Even if you don’t receive an official 1099 form from your issuer, you’re expected to report any income received without meeting a spending requirement. If you’re unclear about whether your rewards are taxable, reach out to a tax expert.

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Elizabeth is a contributor to CNET and the The Simple Dollar, where she reviews insurance providers and policies. She has more than three years of experience writing for top online insurance and finance publications including Bankrate, and
Liliana Hall is an editor for CNET Money covering banking, credit cards and mortgages. Previously, she wrote about personal credit for Bankrate and She is passionate about providing accessible content to enhance financial literacy. She graduated from the University of Texas at Austin with a bachelor's degree in journalism, and has worked in the newsrooms of KUT and the Austin Chronicle. When not working, she is probably paddle boarding, hopping on a flight or reading for her book club.
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