Question
From what I can gather from the IRS website, hotels, airline tickets, and merchandise are not taxable, but it looks like cash rebates are. Does anyone know for sure?
Answer
First of all, how can you redeem points for cash??? (besides selling them to consolidators.)
Edited to add: ... or selling them on Ebay.
[This message has been edited by FT wannabe (edited 03-14-2003).]
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A lot of credit cards offer cash rewards.
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Now I know what you are talking about... I originally thought you've discovered a way to turn existing miles/points into cold hard cash. http://www.flyertalk.com/forum/rolleyes.gif
The answer to your question depends entirely on your intend of the original purchase. If you buy something for your business using a cash rebate CC, the "cash back" should be taxable since the original purchase is tax deductible. However, if you buy something for personal consumption, the "cash back" is not taxable.
In either case, I doubt IRS would bother to check on a few hundred dollars of rebates.
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Nice to see someone else that gets up early.
What if I purchase something on my credit card for my employer and then he repays me. Would the cash reward be taxable to me?
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I don't know if it's taxable or not (and I doubt if it is), but unless you get an information return the "income" isn't reported to the IRS. In that case, I wouldn't worry about it.
-David
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The cash-back from credit cards is not taxable and you will not receive a 1099 from your credit card issuer.
(I'm not a tax lawyer, but do work for a credit card company and it would be a nightmare if we had to issue such documents to all our cardholders)
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Yeah, just treat it like money you found on the ground while walking down the street. If the IRS ain't going to find out about it, no need to report it.
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I called the IRS to ask them (from a pay phone of course) and after working through the menus got to the one about cash rebates. Instead of giving me someone to talk to, the message said this topic is a callback topic and I should leave my home phone number. Needless to say I hung up.
Answer
A rebate simply reduces your basis in the item. For example, you buy something for $100 and then receive a $10 rebate. Your basis in the item for tax purposes is $90.