Most credit card rewards are not taxable, but some are
The IRS treats most credit card rewards the same way it treats a discount on your purchase — not as income you owe tax on. When you earn points or cash back by spending money, that counts as a reduction in what you paid, not as money the card company gave you. You do not report it on your tax return.
The exception is rewards you earn without spending your own money. If a card company gives you a sign-up bonus just for opening an account, or pays you cash for referring a friend, the IRS sees that as income. You will receive a Form 1099-MISC from the card issuer if the bonus reaches $600 or more in a single year, and you must report it on your tax return.
The line between a discount and income matters because it changes what you owe. Understanding which rewards trigger a tax form — and which do not — keeps you from overpaying or underpaying when you file.
Key Takeaways
- Rewards earned by spending money on your card (points, cash back, miles) are treated as a purchase discount and are not taxable.
- Sign-up bonuses and referral rewards are treated as income and must be reported if they total $600 or more in a calendar year.
- The card issuer will send you a Form 1099-MISC if your non-spending rewards reach the $600 threshold, and you report the amount on Schedule 1 of your tax return.
- Rewards you redeem for travel, merchandise, or statement credits are still not taxable — only the earning of the reward itself matters for tax purposes.
Spending-based rewards are treated as a discount, not income
When you earn cash back, points, or miles by making purchases with your card, the IRS classifies this as a rebate or discount on what you spent. You paid $100 for groceries and earned $2 cash back — the IRS sees this as you paying $98 for the groceries, not as you receiving $2 in income.
This applies regardless of how you use the reward. If you redeem points for a free flight, a hotel stay, or merchandise, or if you convert them to cash, the tax treatment is the same: no tax owed. The reward is a benefit of the purchase, not separate income.
You do not receive a tax form for spending-based rewards, and you do not report them anywhere on your return. This is true even if you earn thousands of dollars worth of rewards in a year.
Sign-up bonuses and referral rewards are taxable income
A sign-up bonus — points or cash the card company gives you just for opening an account and sometimes meeting a spending threshold — is treated differently. The IRS sees this as a payment from the card company to you, not as a discount on something you bought. It counts as income.
The same rule applies to referral bonuses. If you refer a friend who opens the card and the company pays you points or cash, that payment is income. It is not tied to your own spending, so it does not may have access to for the discount treatment.
Other non-spending rewards that trigger this rule include cash bonuses for switching banks, opening a checking account, or completing other actions unrelated to purchases. Any reward you receive without spending your own money is likely taxable.
When you receive a Form 1099-MISC and what to do with it
If your sign-up bonuses, referral rewards, and other non-spending rewards total $600 or more in a single calendar year, the card issuer must send you a Form 1099-MISC by January 31 of the following year. This form reports the amount in Box 3 (other income) or Box 7 (nonemployee compensation), depending on the card company's classification.
You will receive one copy to file with your tax return and one copy for your records. The card company also sends a copy to the IRS, so the IRS will expect to see the income reported on your return.
Report the amount from the Form 1099-MISC on Schedule 1 (Form 1040), Part 1, Line 8 (other income). Add it to your total income for the year. If you received multiple forms from different card companies, add all of them together on that line.
Rewards under $600 and record-keeping
If your non-spending rewards fall below $600 in a year, the card issuer is not required to send you a Form 1099-MISC. However, the income is still technically taxable — the $600 threshold is just when the issuer must report it to the IRS.
In practice, most people do not report rewards under $600, and the IRS rarely pursues it. But technically, if you earned $550 in sign-up bonuses, that amount should be reported as income. Keep records of any sign-up bonuses or referral rewards you receive, even if no form arrives.
If you are unsure whether a particular reward is taxable, ask yourself: Did I spend my own money to earn this, or did the card company give it to me for free? If you spent your own money, it is not taxable. If you did not, it is.
How to handle rewards if you are self-employed or run a business
If you use a business credit card and earn rewards on business purchases, the tax treatment depends on whether the reward is spending-based or not. Spending-based rewards are still not taxable — they reduce your business expenses, which is already factored into your profit calculation.
Non-spending rewards (sign-up bonuses, referral bonuses) are still taxable income and must be reported. If you receive a Form 1099-MISC, report it on Schedule 1 just as you would for personal rewards. Some business owners mistakenly try to deduct these as business expenses, which is incorrect — they are income, not deductible costs.
Keep your card statements and any forms you receive in your business records. If the IRS questions your return, you will need to show what rewards you earned and when.
State taxes and rewards
Federal tax rules explore nationwide, but state tax treatment can vary. Most states follow the federal rule that spending-based rewards are not taxable. However, a few states may have different rules for certain types of rewards or may tax all rewards as income.
If you live in a state with an income tax, check your state's tax authority website or speak with a tax professional about how your state treats credit card rewards. The difference is usually small, but it is worth confirming if you earned a large sign-up bonus.
Frequently Asked Questions
Do I have to report cash back I earned from everyday spending?
No. Cash back from regular purchases is treated as a discount, not income. You do not report it on your tax return, and you will not receive a tax form for it, no matter how much you earn.
What if I earned a $700 sign-up bonus but the card company did not send me a Form 1099-MISC?
Contact the card issuer and ask for the form. They are required to send it if the amount is $600 or more. If they do not respond, you should still report the income on your return based on your own records, because the IRS may have received a copy of the form.
Can I deduct sign-up bonus income as a business expense?
No. Sign-up bonuses are income, not expenses. You report them as income on Schedule 1, not as a deduction. If you earned the bonus on a business card, it still counts as income, not a cost you can write off.
If I transfer my rewards points to another person, do they owe tax?
No. The person who earned the points owes any tax, not the person who receives them. Once you have earned the reward, transferring it does not create a new tax event for either party.
Are airline miles earned from credit card spending taxable?
No. Miles earned by making purchases are treated the same as cash back or points — they are a discount on your spending, not taxable income. You only owe tax if you earned the miles through a sign-up bonus or other non-spending offer.