Are your credit card rewards subject to taxes? Here’s why you might receive 1099 forms in the mail

If you rack up a lot of credit card rewards, you might wonder whether they're taxable. Generally speaking, no — your rewards are not treated as taxable income.

However, there have been instances where individuals received 1099 forms for certain sign-up bonuses. Many Chase cardholders, for instance, have reported getting 1099s for sign-up bonuses linked to Marriott cobranded cards, the Amazon gift card bonus for Amazon cards, and promotional credits they earned through their credit cards, as highlighted by FlyerTalk and Doctor of Credit.

I can relate. I've received two 1099s from Chase before — one was expected, and the other was a surprise.

Let’s clarify when you might receive a 1099 for your credit card rewards and what steps to take if you think you've received one by mistake.

Are credit card rewards subject to taxes?

In general, credit card rewards are not taxable. Typically, rewards that require spending to earn are not classified as taxable income. This means standard welcome bonuses, everyday spending rewards, and credit card perks like statement credits are usually exempt from taxes.

The exception to this is any bonus that you receive without having to spend, such as referral bonuses and automatic bonuses for opening a new bank account. Since these don’t require spending to earn, they are considered taxable income.

Which credit card rewards are taxable?

While most rewards aren't taxed, one exception is referral bonuses earned when someone uses your referral link to apply for a credit card. This bonus counts as income since it doesn't require any spending to obtain. (Your friend, on the other hand, won't have to pay taxes on the bonus they earn by meeting their spending requirement.)

Is cash back subject to taxes?

Generally, no. According to a 2010 memorandum from the IRS, cash back earned through credit card purchases is not classified as taxable income. However, if it’s received as part of opening a bank account without meeting a minimum spending threshold, it must be reported as income.

Are rewards from business credit cards taxable?

Similar to personal cards, welcome bonuses and rewards earned from spending on business credit cards are generally not considered taxable income. However, when claiming business expenses, you can only deduct the net cost of an item after accounting for any statement credits received, rather than the full amount before applying those credits.

Are bonuses for opening bank accounts taxable?

Yes. Bank account sign-up bonuses are akin to credit card referral bonuses — you don't need to make a purchase to earn them. As a result, they are subject to taxes according to the IRS. Similar to credit card referral bonuses, while you may not always receive a 1099 for these bonuses, you are still required to report them as income.

Will I get a 1099 for my credit card rewards?

In some cases, you may receive a 1099-MISC or 1099-INT if you've earned taxable rewards from a card. A 1099 serves as an information return document for the IRS, detailing the income you've received from a third party.

However, not every issuer will provide these forms. It's advisable to maintain your own records, as you'll still need to report all of your income — even if a 1099 isn't sent to you.

Which issuers provide 1099 forms for credit card rewards?

Most major issuers issue 1099s for referral bonuses that total $600 or more. If you don't receive a 1099, you can ask your bank for one or estimate the income yourself. Regardless of whether the bank provides a 1099, you are still required to report this income to the IRS.

While the general rule is that you'll only receive a 1099 for referral bonuses, Capital One has also issued them in recent years for statement credits, treating these as gifts that may be taxable.

Furthermore, in 2024, some individuals reported receiving a 1099 from Chase for the Amazon gift card issued as a sign-up bonus on Amazon cards. I received my card during October's Prime Day and got a $150 gift card as my bonus.

Sure enough, I received a 1099 in the mail for the $150, as well as another for the Chase referral bonuses I earned the previous year.

Matt Moffitt, TPG's managing editor for credit cards, got a 1099 from Capital One for his referral bonuses from 2023. He earned 100,000 Capital One miles for four referrals, which Capital One appraised at 1 cent each. Consequently, his 1099 reported $1,000 in taxable income.

Many others have also reported receiving a 1099 for their Marriott bonus, which offered five free nights — something we haven't seen before.

If you believe you received a 1099 in error, you can reach out to the issuer for clarification or correction.

Traditionally, banks have classified statement credits and bonus points as rebates on spending, which the IRS does not classify as taxable income. So far, we haven't observed major issuers consistently adopting this approach, but we'll monitor the situation. If sign-up bonuses and statement credits start being regularly taxed, it will impact our assessment of a card's net value over time.

How do I report my credit card rewards income on a 1099?

You should report this income under the "Other income" section on line 8z of your 1040, as indicated on Schedule 1, line 22.

To determine the value of referral bonuses, refer to the issuer's valuation of their points or miles compared to third-party valuations. For instance, Capital One values their miles at one cent each, while TPG assigns a value of 1.85 cents per point (as of July 2024). When calculating the value of Capital One referrals, you should use their one-cent-per-point valuation.

Final Thoughts

Even if you've amassed rewards worth thousands this year from credit card welcome bonuses and regular spending, taxes generally won't apply to those rewards. However, you are required to pay taxes on rewards obtained from referral bonuses or for opening a new bank account. It's wise to keep track of these income sources, as you might not receive a 1099 from the bank for them.

If you're worried about potential taxes on your credit card rewards or have additional questions, it's advisable to consult a tax expert.