There have been several questions about reward point/loyalty programs offered by credit cards
Should the benefit offered by these reward programs be considered taxable income? Please state what country your answer applies to as the tax rules may differ from place to place.
My understanding is this is considered a "rebate." I view the cash reward as recovering part of the merchant fee charged for the use of my card. It's not income because it's my own money. Now, when I use the card for business items that I'm reimbursed from my employer 100%, in theory those rebates should be taxed, in practice, there's no tracking.
I am in the US. My current card gives me 2% back, with no limit. This goes into a 529 account (A college savings account) which as of early-2017 passed $32,000 in value.
I had the pleasure of taking advantage of a 10% reward card for a brief time, mentioned in an article on my blog, with a further link to the full story. I add this only to note that even the 10% cash back, and I never saw a 1099 for this. This year, I applied for, and got, an airline card, 60K miles for the first $1000 I charged. I suspect that's a case where I should expect the tax bill.
US: This came up recently on The Consumerist - the rewards themselves are not taxable, however anything you receive as an incentive to open the account, e.g. X bonus miles, may be taxable, and if it exceeds a certain amount, a 1099 is issued.
USA: The banks are responsible for issuing a 1099 tax form if it is considered taxable and above a certain dollar limit. They do not so for credit card rewards, so they have clearly decided it is not taxable.
Note that they do consider rewards for checking/savings products to be taxable, and you will get a 1099 if the equivalent cash amount is high enough. This is also something to watch out for if the reward is related to a combination of bank accounts and credit accounts, like Chase sometimes does.
In the UK,
There has been talk but no action yet to tax them when the employer pays the card bill but the employee gets the points. Likewise with air miles.
I don’t expect any action if the level of the points doesn’t go up and employers don’t use it as a way to provide a tax free benefit.
Here's a recent Forbes article I read that covers this subject. I linked directly to the 2nd page (where the Q&A starts), but the 1st page is somewhat interesting in its own right.
