When You Have to Pay Taxes on Credit Card Cashback
Cashback is usually not taxable, but there are exceptions that depend on how you earned it
Most cashback you earn from everyday credit card spending is not taxable. The IRS treats it as a rebate — a reduction in what you actually paid for something, not income you received. If you spend $100 on groceries and get $2 back as cashback, the IRS sees it as you paying $98, not as you earning $2.
The exceptions matter, though. Cashback from sign-up bonuses, shopping portals, and certain promotional offers can be taxable depending on the circumstances. Banks and card issuers are not required to report cashback to the IRS on a tax form, which means the burden falls on you to know the difference and report it correctly if it applies.
Key Takeaways
- Cashback from regular purchases is treated as a rebate and is not taxable income.
- Sign-up bonuses and promotional cashback offers may be taxable as income, depending on whether they require you to meet spending thresholds.
- Cashback earned through shopping portals or third-party rewards programs can be taxable if it comes from a business or merchant paying for referrals.
- The IRS does not require card issuers to report cashback on a 1099 form, so you are responsible for tracking and reporting it if it is taxable.
- When in doubt, consult a tax professional, especially if you earned large sign-up bonuses or cashback through business spending.
Why regular purchase cashback is not taxable
The IRS classifies regular cashback as a rebate or discount, not as income. This is the same way they treat any discount you negotiate at a store or a coupon you use at checkout. You are not earning money — you are paying less for something you bought.
This applies to cashback from everyday purchases: groceries, gas, restaurants, online shopping, or anything else you would have bought anyway. The card issuer is giving you a small percentage back as an incentive to use their card. That incentive is built into their business model, not a taxable event.
Because of this, you will not receive a 1099 form from your credit card company for regular cashback, and you do not report it on your tax return.
Sign-up bonuses and when they become taxable
A sign-up bonus — cashback or points you receive just for opening an account — sits in a gray area. Whether it is taxable depends on whether you had to spend money to get it.
If the bonus comes with no strings attached (you open the card and get $200 cashback immediately), the IRS may view it as taxable income. Some tax professionals argue it is a rebate on future purchases, but the IRS has not issued clear guidance, and different tax preparers handle it differently.
If the bonus requires you to spend a certain amount within a timeframe — for example, "spend $3,000 in the first three months and earn $300 cashback" — it is more clearly a rebate on those purchases and not taxable. You are meeting a condition to receive the discount, similar to a store promotion.
Large sign-up bonuses (typically $600 or more) are more likely to trigger scrutiny. If you are unsure whether to report yours, a tax professional can review your specific card's terms and your situation.
Cashback from shopping portals and referral programs
Some credit card companies operate shopping portals where you click through to a retailer and earn extra cashback on top of your card's regular rate. This cashback usually comes from the retailer paying the card company for the referral, not from the card issuer themselves.
Cashback earned this way can be taxable because it is technically income paid to you by a third party (the retailer or a rewards aggregator). However, most card issuers do not report it to the IRS, and the amounts are usually small enough that they fall below reporting thresholds.
The same applies to referral bonuses: if you refer a friend and earn cashback when they open an account, that bonus may be taxable income. Again, it is rarely reported on a 1099, but it is technically income you should track.
Business spending and cashback on company cards
If you use a business credit card and earn cashback on business expenses, the tax treatment depends on whether you own the business or work for someone else.
If you are self-employed or own a business, cashback on business purchases is typically not taxable — it reduces your business expenses, which lowers your taxable profit. You track it the same way you track any other business discount.
If you are an employee using a company card, any cashback belongs to your employer, not to you. You should not report it as personal income.
If you are an employee using your own personal card for business expenses and your employer reimburses you, the cashback is yours to keep and is not taxable — it is a personal rebate on money you spent out of pocket.
How to track cashback for tax purposes
Because the IRS does not require card issuers to report cashback on a 1099 form, you are responsible for keeping your own records. This is especially important if you earned sign-up bonuses, shopping portal cashback, or referral bonuses that might be taxable.
Keep a simple spreadsheet or document that lists the date, the card, the type of cashback (regular purchase, sign-up bonus, shopping portal, referral), and the amount. Most credit card apps and online portals show your cashback history, so you can pull statements as backup.
If you earned cashback through multiple cards or programs in a year, add it up. If the total is substantial and includes items that might be taxable, bring the list to your tax preparer so they can advise you on what to report.
What to do if you received a 1099 for cashback
It is rare, but some card issuers or rewards programs do issue 1099 forms for cashback, usually when the amount is large or when the cashback came from a promotional offer rather than regular purchases.
If you receive a 1099 for cashback you believe is not taxable (such as regular purchase rebates), you have options. You can report it as income and then deduct it as a business expense if it applies to business spending. You can also attach a note to your return explaining why you believe it should not be taxable.
The safest approach is to consult a tax professional before filing. They can review the 1099, your card's terms, and your specific situation to determine the correct way to report it.
Frequently Asked Questions
Do I have to report cashback on my tax return?
Regular purchase cashback does not need to be reported — it is treated as a rebate, not income. Sign-up bonuses and promotional cashback may be taxable depending on the terms, but since they are rarely reported on a 1099, the IRS does not expect you to report them unless the amount is very large. When in doubt, ask a tax professional.
What if my cashback adds up to thousands of dollars?
Large amounts of cashback, especially from sign-up bonuses or shopping portals, are more likely to be considered taxable income. If you earned several thousand dollars in cashback across multiple cards or programs in one year, consult a tax professional before filing. They can help you determine what portion, if any, should be reported.
Is cashback taxable if I use it to pay off my credit card balance?
No. How you use the cashback does not change its tax status. Whether you keep it as a statement credit, transfer it to a bank account, or use it to pay your balance, it is still treated the same way for tax purposes — as a rebate on your purchases.
Can I deduct cashback as a business expense?
If you earned cashback on business purchases and you are self-employed or own a business, the cashback reduces your business expenses, which lowers your taxable profit. You do not deduct it separately — it is already factored in as a lower cost. If you received a 1099 for business cashback, you can report it as income and then deduct the business expenses to offset it.
What should I do if I am not sure whether my cashback is taxable?
Keep records of all cashback you earned, including the date, card, type of offer, and amount. If the total is small (under $500) and mostly from regular purchases, you likely do not need to report it. If you earned large sign-up bonuses or cashback through promotional programs, bring your records to a tax professional who can review your specific situation.