Credit card cashback is generally not taxable income
The IRS treats most credit card cashback as a reduction in your purchase price, not as income. When you buy something for $100 and get $2 back as cashback, the IRS sees it as if you paid $98 — not as if you earned $2. This is the same logic that applies to store discounts or manufacturer rebates.
The exception is narrow: cashback becomes taxable only when you receive it for something that is itself not a purchase. The most common case is cashback earned on a credit card sign-up bonus, which the IRS treats as a taxable reward rather than a discount on a purchase you made.
For the vast majority of people, this means your everyday cashback — from groceries, gas, restaurants, travel — stays off your tax return entirely. You do not report it as income, and you do not deduct it as an expense.
Key Takeaways
- Cashback earned on purchases you make is treated as a discount on that purchase, not taxable income.
- Sign-up bonuses and rewards for opening an account may be taxable and should be reported on Form 1040 if they exceed $600 in a calendar year.
- Cashback on business purchases may be deductible as a business expense reduction, depending on how you structure your accounting.
- Credit card companies report large rewards to the IRS only if they exceed $600 in a single calendar year, using Form 1099-MISC.
When cashback counts as taxable income
Cashback becomes taxable when it is a bonus for opening an account or meeting a spending threshold, rather than a return on money you spent. A $200 sign-up bonus for opening a new credit card is taxable income in the year you receive it. So is a $500 bonus for spending $5,000 in the first three months — because the bonus is the reward, not a discount on what you bought.
The IRS distinguishes between two things: a reduction in what you paid (not taxable) and compensation for an action you took (taxable). A sign-up bonus is compensation. Cashback on a purchase is a reduction in price.
If your total rewards from a single card issuer exceed $600 in a calendar year, the card company will send you a Form 1099-MISC in January. This form reports the rewards to both you and the IRS. You must include this amount on your tax return, usually on Form 1040 as miscellaneous income.
The $600 reporting threshold and what triggers it
Credit card companies are required to report rewards to the IRS using Form 1099-MISC only when the total reaches $600 or more in a single calendar year. This threshold applies per card issuer, not per card. If you have two cards from the same bank and earn $400 on each, the bank combines them and does not file a 1099-MISC. If you earn $350 on one card and $300 on another from the same issuer, they still do not file.
However, the $600 threshold is a reporting requirement, not a tax threshold. Rewards below $600 are still technically taxable income if they are sign-up bonuses or account bonuses — the card company just does not report them to the IRS. You are responsible for reporting them yourself if you owe tax on them.
In practice, most people do not report rewards under $600, and the IRS does not pursue it. But the legal obligation exists. If you receive a 1099-MISC for $600 or more, you must report it.
How business credit card cashback is treated
If you use a business credit card and earn cashback on business expenses, the treatment depends on how you account for it. If you deduct the full expense (the $100 purchase) and then receive $2 in cashback, you have overcounted your cost. The cashback should reduce the expense you deduct, so you deduct $98 instead of $100.
Some business owners treat cashback as income instead, which is also acceptable — you deduct the full $100 and report the $2 as business income. Either method is defensible, but you must be consistent. The key is not to both deduct the full expense and ignore the cashback, as that overstates your costs.
If you receive a business sign-up bonus, it is taxable income in the year you receive it, just as it is for personal cards. Report it on Schedule C (if you are self-employed) or on your business tax return.
Cashback on different types of purchases
Cashback on everyday purchases — groceries, gas, restaurants, retail — is not taxable. These are purchases you made with your own money, and the cashback is a discount on what you paid. The IRS does not care how much you earn in everyday cashback.
Cashback on travel purchases (flights, hotels, rental cars) is also not taxable for the same reason. You bought a ticket or a hotel room, and the cashback is a discount on that purchase. The fact that you earned frequent flyer miles or hotel points alongside the cashback does not change this.
Cashback on balance transfers or cash advances is rare, but if you receive it, it is not taxable — it is still a discount on what you paid. Cashback on charitable donations, however, is a gray area. Some argue it should be reported as income because charitable donations are not ordinary purchases. The IRS has not issued clear guidance on this specific scenario, so if you donate regularly and earn significant cashback, consider consulting a tax professional.
What to do if you receive a Form 1099-MISC for rewards
If your credit card company sends you a Form 1099-MISC reporting $600 or more in rewards, you must report this on your tax return. The form will show the amount in Box 3 (other income) or another box depending on the type of reward. Include this amount on Form 1040, line 8 (other income), or on Schedule 1 if you use the longer form.
If you believe the amount on the 1099-MISC is incorrect, contact the card issuer and ask them to issue a corrected form (Form 1099-MISC with "CORRECTED" marked at the top). You have until the tax filing important date to request a correction. Once you have the corrected form, file an amended return if you have already filed.
Keep records of your rewards for at least three years. If the IRS questions the amount, you can show your credit card statements and the card issuer's reward history to verify the figure.
Frequently Asked Questions
Do I have to report cashback if I earn less than $600?
Legally, sign-up bonuses and account bonuses are taxable income regardless of amount. However, the card company does not report them to the IRS unless they exceed $600. In practice, most people do not report amounts under $600, and the IRS does not pursue it. If you want to be fully compliant, report all bonuses; if you want to follow common practice, report only what appears on a 1099-MISC.
What if I earned cashback in one year but received the 1099-MISC in the next year?
Report the income in the year you received it, not the year you earned it. If you earned $400 in cashback in December 2023 but the card company did not send the 1099-MISC until January 2024, report it on your 2024 tax return. The 1099-MISC date is what matters for tax purposes.
Can I deduct cashback as a business expense?
No. Cashback is a reduction in what you paid, not an expense you incurred. If you earned $500 in cashback on business purchases, you reduce the cost of those purchases by $500 rather than deducting the cashback separately. You cannot both deduct the full purchase price and claim the cashback as a deduction.
Are airline miles and hotel points taxable like cashback?
Airline miles and hotel points earned on purchases are generally not taxable, using the same logic as cashback — they are a discount on what you bought. However, miles or points earned as a sign-up bonus may be taxable if the card issuer assigns them a cash value. Check your 1099-MISC; if the bonus appears there, it is taxable.
Do I need to report cashback if I use the standard deduction?
Yes. Whether you itemize or take the standard deduction does not affect whether you report income. Cashback that appears on a 1099-MISC must be reported as income on your Form 1040, regardless of which deduction method you use.