First, let’s make a distinction.
There’s a big difference between points from a personal credit card vs. points from a card used for business.
For the purposes of this post, we’re going to focus on points from a personal credit card, although I hope to do a post on businesses in the future.
Let’s dive in.
There are generally two categories of points one can be rewarded:
1) Points/Miles/Cash Back earned via spending – These are generally NOT taxable.
They are viewed as a discount or rebate on what you purchased, rather than taxable income.
2) Points/Miles/Cash Back awarded as a sign-up bonus when opening an account – These generally ARE taxable.
You may even receive a 1099 form for the year, showing the amount you were rewarded.
So, in a nutshell, if you need to spend money to get the reward, it’s usually non-taxable.
If you don’t need to spend money, it’s generally taxable.