Is Cash Back Taxable?

Are cash-backs received from purchases considered taxable income?

Credit card cash-back rewards are generally NOT taxable. They are considered a rebate offered on purchase price rather than income. There are a couple of exceptions – if there is no spending requirement to earn a reward then it would be considered taxable by the IRS. For instance, if a credit card offers a cash back bonus just for signing up, that would be taxable. Also, if cash back is received for referring a friend, it’s considered compensation for a service, like a commission. In this case, the cash-back bonus would be taxable. Additionally, if a business receives credit card rewards, they would need to subtract the benefit from any business expenses they are deducting for tax purposes.”

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