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When you open a new CC account that has a signing bonus, have you gotten a 1099? Does it make a difference whether you get the bonus in cash or points?
I'm reading a promotion that says "You may be issued an Internal Revenue Service Form 1099 (or other appropriate form) that reflects the value of such reward." I figure that if I'm going to get taxed for this, I might as well wait until January.
@ msf: Signing bonus is considered a rebate and therefore is not taxable. In 2014, the U.S. Tax Court held that a petitioner who had received a 1099-MISC for a bank account sign-up bonus in 2009 still had to report as income bonuses earned when opening the account. ... But Citi clarifies that this tax reporting applies only to awards earned for opening bank accounts, not credit card rewards.Mar 21, 2016 Regards, Ted https://creditcards.usnews.com/credit-card-rewards-arent-taxable-if-you-earn-them
Thanks Ted, though the article goes on to show that this isn't quite what Citibank said.
The next paragraph gives the actual Citibank quote, where it draws a distinction between a receiving a gift for opening a bank account and receiving rewards (e.g. points) for using a CC. Mind the gap. Citibank is silent about getting something for opening a CC account.
The article does go on to say that "If you needed to make purchases to earn the rewards, the bonus can likely be taken as a rebate," i.e. not taxable. Note the qualification here - nothing definitive.
The best one can say appears to be that one will probably not get a 1099 for a bonus worth less than $600 and one is probably not liable for tax on that bonus if it required a min spend within the first few months.
There's likely nothing clearer than that. Good find.
Was that a pure bonus, or did it require some spending? I recall AmEx used to give great bonuses on student cards (free companion coupons on Continental Air, maybe some other stuff).
I am sure that the "usual" rewards points, e.g. 2% cash back, are treated as rebates (reductions of purchase price) rather than taxable income. The confusion comes in when the reward is for opening an account but it comes with a condition that one must use the card.
To take the question to the absurd extreme, what if you get a $500 signing bonus for spending $300 on the card. That can't possibly be a rebate, because you can't get your purchases for less than $0. Is the remaining $200 taxable, is the entire $500 taxable, or is none of it taxable on the general principle that signing bonuses requiring a spend are rebates, period?
@msf - the bonus required me to charge $1K to the card during the first 90 days after registering the card. I used the money to pay for half of my RT flight to Sydney. Good deal!
Comments
Regards,
Ted
https://creditcards.usnews.com/credit-card-rewards-arent-taxable-if-you-earn-them
The next paragraph gives the actual Citibank quote, where it draws a distinction between a receiving a gift for opening a bank account and receiving rewards (e.g. points) for using a CC. Mind the gap. Citibank is silent about getting something for opening a CC account.
The article does go on to say that "If you needed to make purchases to earn the rewards, the bonus can likely be taken as a rebate," i.e. not taxable. Note the qualification here - nothing definitive.
The best one can say appears to be that one will probably not get a 1099 for a bonus worth less than $600 and one is probably not liable for tax on that bonus if it required a min spend within the first few months.
There's likely nothing clearer than that. Good find.
I am sure that the "usual" rewards points, e.g. 2% cash back, are treated as rebates (reductions of purchase price) rather than taxable income. The confusion comes in when the reward is for opening an account but it comes with a condition that one must use the card.
To take the question to the absurd extreme, what if you get a $500 signing bonus for spending $300 on the card. That can't possibly be a rebate, because you can't get your purchases for less than $0. Is the remaining $200 taxable, is the entire $500 taxable, or is none of it taxable on the general principle that signing bonuses requiring a spend are rebates, period?
Regards,
Ted