Are Cash Rewards Taxable? What US Consumers Should Know

Rewards can feel like a small bonus, but the tax treatment varies depending on the kind of reward. This is general information only, and you should confirm your situation with a tax professional or the IRS.

Cash back on purchases

Cash back earned on purchases is generally treated by the IRS as a rebate or price reduction, not as income. That means it is usually not taxable, though this can depend on the circumstances.

Bonuses and payments for actions

Rewards that are paid to you for doing something, such as a cash payment for completing tasks or a sign-up bonus paid in cash, may be considered income. Some bonuses are reported to the IRS on a Form 1099 if they meet certain thresholds.

Survey and task earnings

Money earned from surveys and online tasks is generally considered income. Even if you do not receive a tax form, you may still be required to report it.

Referral payments

Payments you receive for referring people to a program can also be taxable income.

Points and miles

Points earned from spending are usually not taxed, but rewards from other sources can be treated differently. Rules vary.

Business income

If you earn money from affiliate marketing, freelancing or a website, that income is generally taxable and may be subject to self-employment tax.

Keep good records

• Save payment confirmations and any tax forms
• Track the date, source and amount of each payment
• Keep records of related expenses
• Use a spreadsheet or simple bookkeeping tool

Forms you may see

Payers may send a Form 1099-MISC or Form 1099-NEC or similar forms if they pay you above a reporting threshold. Not receiving a form does not remove your responsibility to report income.

When to get help

Talk to a qualified tax professional if you receive significant rewards, earn income from a website or side business, or are unsure how to report something.

Bottom line

Purchase-based cash back is usually treated differently than income for actions or tasks. Keep records, report income correctly and get professional advice when you are unsure.

This article is for general information only and is not financial, legal or tax advice. See our Disclaimer.