Is Cashback Taxable?
The Internal Revenue Service follows reasonably clear guidelines when imposing cashbacks that you earn via credit card purchases.
From the IRS' perspective, the cash back earned via spending cash is a form of rebate and not an income.
However, if you earn a cash reward without spending any cash, the IRS requires you to report what you get as income.
, and if so, are you obliged to comply? To understand this, you need to get a clear understanding of what cashback is first.
Generally, any income you receive as a taxpayer is subject to tax by the taxman.
However, the type of reward you receive and the method of receiving it determine if it is taxable. If you are wondering whether cashback is taxable, you are in the right place.
This article helps you understand the complexities of cashback and tax.
In addition, DoNotPay can guide you to understand the taxable nature of cashbacks and other rewards. Read further to understand if cashback is taxable.
What Is Cashback?
Cashback reward is a benefit that rewards you with a small percentage of the amount you spent on purchases above a certain dollar threshold.
The launch of the Discover card in 1986 introduced the concept, along with Discover cashbacks.
Since the introduction of cashbacks, almost every major credit card has had the feature on at least one or more of their products.
An example is the Citi cashback card. As an Apple user, you can also enjoy an Apple card cashback for your purchases.
Are Cashback Rewards Taxable?
The IRS usually views any cash rewards earned via spending money on credit cards as discounts and not income.
For instance, if you spend $2,000 on a card offering a 2% cashback, then receive a $40 cashback, the IRS considers this a $40 discount. As such, it is exempt from taxable income.
However, in certain scenarios, you may need to pay tax on credit card cashbacks. Select credit cards to come with sign-up offers providing gift cards or cash rewards without spending any cash, except purely for opening the account.
Such an instance may include you getting a new Amazon Rewards credit card. Consequently, the IRS views this as taxable income when no purchase is connected to the cashback you receive.
Should You Declare Cashbacks on Your Tax Returns?
No, you shouldn't worry about reporting the cashback you receive for spending money, since the IRS sees it as a discount.
However, if you earn any cashbacks via non-spending-linked offers, you must report such on your tax return.
In the instance of cash back, you earn without meeting any spending-based criteria, and if the cashback value exceeds $600, your card provider will provide you with a Form 1099-MISC: Miscellaneous Income. Receiving this form means you have to report the cashback as income on your returns.
How to Get a Cashback
Cashbacks are typically issued upon purchasing via credit cards, debit cards, or personal checks. However, the credit card option is the most common for most buyers. To receive cashback on a credit card,
- You need to spend money on an eligible purchase
- Specify your cashback amount
- You will automatically earn a percentage back depending on the credit card rules.
Most cashback credit cards offer attractive cashback bonuses to new cardholders. For instance, if you're choosing your first card, the Capital One Quicksilver Cash rewards credit card currently offers a $200 cashback statement credit in case you spend $500 within your first three months of being a cardmember.
DoNotPay can help you discover the best cashback credit cards. Getting cashback without expert help can be hectic at the very least.
Since cashbacks come from the vendor's cash reserve, there is a cap on how much cash back you can get. Therefore, unnecessary limitations, among other challenges, make it hard to receive your cashback promptly.
Looking to Get Cashbacks? DoNotPay Can Help You
Fortunately, you don't have to undergo the process of claiming your cashbacks alone. DoNotPay is the perfect solution to help you receive your credit card cashbacks.
With DoNotPay, the process is fast, easy, and success-guaranteed. Follow these DNP-generated steps to receive your cashbacks fully:
- Search for Cashback on the DoNotPay website.
- Kick-off the process to find the right app or website for you.
- Answer some specific questions so that we can help you start making money!
Receive your cashback today by signing up to get DoNotPay expert assistance.
Besides claiming cashbacks, DoNotPay can also assist you in:
|Getting cashback with Apple Pay||Discovering how cashbacks work on credit cards||Finding cashback apps|
|Getting Walmart cashback limit||Getting money back from PayPal|
How Else Can DoNotPay Help?
DoNotPay is a global robot lawyer providing a wide selection of services to solve several issues. Besides helping you receive cash backs, DoNotPay can also help you with:
- Overwhelming bills
- Getting gift card cash backs
- Finding missing money
- Disputing parking tickets
- Signing up for free trials risk-free
- Getting free raffle tickets
- Contacting customer service
- Solving credit card issues
Sign up with DoNotPay to receive your credit card cashbacks.