Are Credit Card Rewards Taxable?

[@taxleverage]

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[@cgal639]

Great info. Thanks!

[@kunsangG]

wow learn something new thanks

[@Lucasbdlt]

I didn't know that IRS made the wrong argument int that case. I get the feeling that it was done on purpose though. There seems to be no incentive for the IRS to win that case and potentially have to start regulating or taxing cash back programs because companies make a business mistake.

[@nicholash8021]

They can tax your credit card rewards, but won't bother to deduct the interest you were charged on that same card which probably exceeds those rewards. The irony...

[@Yachid]

hey Jaz°! {17602 (?) would U like to cover this video/topic: 'Do You Know The 11 Types of Income the IRS Doesn't Tax' [2024 Feb 25 {qv kzbin.info/www/bejne/aZ-ylXxmitF4j9Esi=dTpDs5YU3GyQzUxr }

[@soroushme]

That was perfect. No time-fillers, no beating around the bush, no nonsense. Straight to the point, concise, and covered all the important and relevant aspects to the topic. Great presentation. Thanks for the great content.

[@taxleverage]

You're welcome! Glad you enjoyed

[@debraferrara7682]

What if you haven't received the perks

[@SnipetsofTime]

For reals

[@joshuaborem7063]

The vid is over 12 minutes long. No credit due for being concise.

[@lazm3518]

Are you kidding? I almost fell asleep around 1:50

[@gingerkilkus]

I dislike taxes for one main reason: the government requires individuals to calculate their own taxes and imposes heavy penalties for mistakes. While I have no problem paying taxes as a US citizen, it seems strange to me that I have to do the paperwork when the government already has all the necessary information.

[@RaybellarayRay]

I don't regret the financial mistakes I've made in the past, as they've all taught me valuable lessons. However, my biggest misstep was planning my finances without consulting a licensed financial advisor.

[@williamDonaldson432]

I sought the guidance of a financial counselor, and as I near retirement, their advice has proven invaluable. I was initially concerned that compound interest on index funds wouldn’t suffice since I started investing later. It's quite amusing to realize that I’ve outperformed colleagues with more investment experience, having gained over $386k tax-free.

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This is definitely significant! Do you have any recommendations for professionals or advisors I could contact? I really need guidance on proper portfolio allocation.

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[@thebigunodos3559]

This channel has the most useful tax information that is pertinent to me. Thank you for all your work in educating people on taxes!

[@nicoleeboo38]

Was a little bit worried that I was about to find out my cashback rewards were supposed to have been taxable the whole time, thank goodness that's not the case! 😌

[@ToddM452]

Me too, but they would have to figure it all out and come find me to get it.

[@callikesthis]

Jasmine, you make the best tax content on KZbin. Please keep going, it is so helpful to me as a small business owner. Thanks for putting in the extra effort.

[@Gambit135]

Not exactly a CC reward taxation example, but I had a similar taxation issue after opening a savings account. There was a $250 reward (cash credit to your account) if you maintained a certain avg balance over x months. Sure enough got my reward credit, but then during tax season got a 1099-INT that not only included my YTD interest earnings, but also the $250 reward tacked on as interest income. That was a bit of let down. lol.....I mean it does make sense, it was essentially bonus interest income rewarded beyond the stated rate, still annoying at the time lol.

[@DonaldRedeemed]

I have taken advantage of offers like that a few times and it was always been clear up front that was the case, but my effective tax rate has always been rather miniscule.

[@hikerJohn]

That's EARNED INCOME so it needs to be accounted for on a return. Points back on a CC is not earned income, they are simply discounts and credits so you are spending less NOT making more.

[@satcheradams153]

I thought the reward was a gift from the buisness.

[@aurianfaridi4207]

I love how casual you are about that KZbin plaque! Put that shit on the wall girl! You deserve it. Celebrate your wins.

[@investingkari9060]

Jasmine, I love how thoughtful and well-researched all your videos are! Thanks for the insight - good to know cashback vs points and personal vs business. Please continue to make educational videos!

[@vincenz5]

Just noticed this all of a sudden with this video- you're clearly making a great effort to consistently use your hands and face to express your points and keep the video engaging. Honestly, it's really impressive once you start to notice it. Thank you for doing that since the topic is of course fundamentally a dry topic that is difficult to make engaging.

[@Poter3581]

agree, yet her valley girl/vocal fry/voice works against her.

[@berg8970]

@@Poter3581 Didn't your mother ever teach you, that if you have nothing nice to say then say nothing?

[@MUUKOW3]

​@@Poter3581Would you rather Yeardley Smith? She definitely doesn't sound like a Valley Girl lol

[@sprky777]

Income tax was paid on the initial money that was spent. Sales tax was paid on the total money that was spent. Getting anything back is only a small percentage being returned on money already taxed twice.

[@vincentortega4284]

Hi Jasmine! Wow, I never really thought about rewards being taxable. Excellent content. Keep up the Great work Jasmine

[@sebastiaanthijn7982]

What about a credit card statement ?!!

[@sebastiaanthijn7982]

Income tax is totally unlawful !!

[@rodgertim2881]

That has only brought 5% more expensive growth in everything in decades of credit card industry.

[@rodgertim2881]

Preach! It's enough to make anyone want to crawl under the covers. These news cycles can be brutal.

[@BarbaraPearson55]

How ??!

[@cherylhills3227]

It's really wise to have professional guidance

[@thegardencity92]

Thank you for covering this topic, love your channel

[@ginyu8312]

Jasmine, thank you so much for all this tremendous direct-to-the-point content! I really enjoy your educational videos!

[@philh8829]

Former employer had a bunch of LLCs. Dealerships. Would make sure at the end of every day to inventory swap all their parts to max out their credit cards, and then buy the parts back. The cashback was greater than the transaction fee… shhh, don’t tell anyone, and especially not the fact they brought in a CFO that opened up accounts in the Caribbean and Europe. I’m sure it’s all above board.

[@fatmanchew909]

The only time I know anything is taxable from my bank/credit card is when I get that 1099 form in February telling me how much interest/dividends/etc I get to enjoy paying taxes on.

[@notpublic8961]

Have fun at your IRS audit!

[@g.t.richardson6311]

irs isn’t coming after rewards Enjoy your crow

[@MarkPlassmeyer]

Great presentation. I'm studying for my EA and have always had a geeky interest in reading the law and court opinions. My biggest takeaway from your video was the importance of research to understand the position of the IRS on matters, as well as how it might change.

[@m.necatisepetcioglu4391]

i dont even live in US , i live in Bergen Norway. i enjoy following you. ❤

[@ShubhamPatil-cb8dk]

You think that makes u special?

[@brianhartnett9374]

I learn so much from each video you post each one is packed with terrifically 😢useful information. Thank you!

[@halking3497]

That is best tax presentation I ever heard. I had long wondered about that. Now I know. Thank you.

[@sman5877]

glad i found this channel. her explanations are pretty easy to understand.😊 thank you 🙏

[@GrimReaper01776]

The way she teaches math is amazing.

[@blakeblocke3679]

awesome channel, found u on shorts. u have grown crazy fast; not hard to do when ur competition is a bunch of pump&dump crypto bros who struggle to articulate how a 1099 works or thought FTX was a solid investment, you are the voice of reason in the abyss of nonsense money/ finance youtube pit. Thank you

[@lseh4720]

Such a trustworthy person. Thanks. 😊

[@squeegeeman2000]

Great explanation! It sounds like it is always a better plan to take business credit card rewards as points/miles vs. cashback.

[@markbajek2541]

Interesting , I used to get 1099 Misc for "spiffs" from manufactures or their repping firms for selling their brand product over maybe some other brand products. Sometimes there would be a "contest" with various prizes , those too were 1099'd. If the value exceeded $600 for the year from any one brand or a combination of brands repped by one repping company you'd get a 1099.

[@shlomobenzaquen974]

Love your long form content!!

[@taxleverage]

Thank you!

[@joeygee11]

Best channel with real world guidance.

[@fzigunov]

Refreshing to see somebody who knows their stuff take time to talk to the public! A question: If the credit card is used by a private person to purchase a good or travel for business purposes, and they get reimbursed by the company employer; then they effectively made money on the cashback rewards. Is that then taxable? This is a very common situation for corporate employees who travel or purchase materials for construction, etc.

[@mikefochtman7164]

Hmm... I'm not a lawyer. But it seems to me that you are basically buying something and then turning around and effectively 'selling' it to your company at the same price. In general if you purchase something for personal use and sell it at a profit, that profit is actually taxable. So if you bought those tickets, and get a reduced cost (owing to cashback rebate), you MIGHT have to claim the sale to the company with profit. But if you buy it and just get 'reward points' to be used at some future point, then the IRS has already said, "yeah, it might be taxable but we're just not going to track it.... yet".

[@BenjaminHeyser]

I am also not a lawyer but agree with Mike's assessment. I travel for work some so this could apply to me. I'll add that if the IRS ever wanted to start tracking that and collecting it would be a nightmare. I would personally get a separate credit card that does not have cash back rewards to use for business related purchases to avoid the hassle. Either go with no rewards or get an airline miles or hotel points card since the IRS has stated those won't be taxed.

[@donniethesportsguy893]

No not taxable. Just a benefit based on circumstances.

[@occasus7964]

You aren't going to report reward earnings on your taxes. It's simply a relief from Sales tax (theft).

[@annamariaisland1960]

Great stuff! From what I have been reading about FF miles, there's no net value to them anyway, so the IRS is doing the right thing by ignoring them for the time being.

[@MoNATUREnique]

Thanks so much for going through the actual law. I will now keep a look out if the law decides to change. I feel people would be hesitant to use reward credit cards if taxes were involved.

[@taxleverage]

Of course! I love going through the ACTAUL tax law, haha

[@PureInsanity]

It's not when used, its when earned. And I feel like people would switch to cards that earn straight cashback instead of miles. Majority of my cards are the former kind, and they are usually better, so no loss there.

[@donniethesportsguy893]

I always understood this: Anything bonus requiring you to spend money is a rebate ( cardholder reward). The thing that is taxable are rewards/bonuses for checking/deposit accounts, no spending requirements only savings.

[@DavidKnicks]

This was a much needed video

[@1859TorchBearers]

all this information helps me with my personal taxes and my starting business

[@taxleverage]

So glad to hear you find it helpful :)

[@edfody5369]

I have always wondered why the irs has never taxed airline and hotel points - I travel for work and accumulate a ton of these points which can have significant value - shhhh!!

[@osco4311]

JD, CPA, EA... Congrats on your very impressive resume!

[@drl5002]

You taught me a new word. I had never heard the term prospectively before.

[@2Big2Fail2Day]

Retrospectively prospectively is a better descriptor

[@drl5002]

@2Big2Fail2Day not really. Concurrent means at the same time. As in serving multiple sentences concurrently.

[@SuperBah1985]

They create a law the irc "any source derived" but they also create an enforcement body that can interpret the law any way they want...And it is selectively enforced according to their determination.

[@nemmrrc]

There you have it!!

[@anthonyhobson367]

Awesome video yet again… I appreciate the distinction you established between cash rebates/reward points and cash credits for opening new accounts, and why the latter is taxable 👍🏾👍🏾

[@taxleverage]

So glad you enjoyed the video!

[@robsprats3900]

This was an excellent analysis, but I think you're missing the bigger picture. Let's say the IRS argued what the judge said they should have argued in Anikeev and the IRS had won the case. In doing that the court would have fundamentally changed tax policy for every business in America that uses a credit card, who would also then be subject to the specifics of the Anikeev ruling. That's a lot of businesses that could be affected overnight! Then throw in the other complexities you bring up in valuing reward points and it's a mess. And let's make it even more fun: Let's consider rewards cards that earn 5x points at restaurants for business meals, which themselves are often limited to a 50% deduction. Want to recalculate that "income" to factor in the different earn rates and then exclude 50% of that particular earn rate on some expenses? That is the path to madness. That's what the IRS may have caused if they argued this case the right way and happened to create precedence in the process. I believe it's more plausible that once the IRS realized that could happen they intentionally chose not to make their best argument.

[@LegitParker]

Anikeev v. Commissioner is such an interesting case! great video.

[@masterthnag105]

I love that infinite money glitch those people found. I assume it has since been patched.

[@張耀仁-v6c]

This is a great video!

[@Kyzyl_Tuva]

That was a fantastic video. Thank you!

[@acd2050]

The IRS messed up, shocker

[@user-tz5uq2bt1s]

The fact that experts who study the law and IRS guidance is necessary evidences the inherent flaw in the design of our system of taxation.

[@christophersuto3263]

So does the same apply to every single different type of lawyer (Criminal, corporate, medical, civil etc.)? All laws should be simplified because the average person can't interpret them?

[@sergem3644]

It's simple. If you didn't get a tax form, it's not taxable. And if tax preparation software didn't ask for it - it's not taxable.

[@TheFinanceEdition]

Can I just say, Jasmine, you are _winning_ on personal branding. Please please please take yourself to #1.

[@ralphparker]

Yes, but you could argue that the reward is only a return of a portion of the money you spent. Like a refund. The reward is an excess of the charge you paid that the company chooses to return to you. It is not like a lottery ticket where the reward is in excess of what you paid. The reward is a discount for being a loyal customer.

[@calvinrickard9378]

Video idea: Please make a video comparing the BAR and CPA exam.

[@mike2959]

You said the magic word about half way through. Rebate. I have 40+ rentals. And also own a restaurant. Combined gross income is over 2m for the year. I use 2 cards. A 2% cash back net 30 Capital One. And a Chase Reserve for particular types of purchases. Hold your breathe… $57,932 last year in cash rewards. This year will be over $64K. We use a card for every single aspect of our business except for payroll. If a vendor doesn’t take a card, we don’t do business. Period. It’s 2024 take a card. We go on 4 really nice vacations every year.

[@mrnobody8540]

Good - your lose, I don't wish to use your credit card as payment - if you don't have cash - your not buying! Not getting into my pocket for your business ventures --- if you are buying in regular bulk, then you can arrange a fund transfer from your bank payment COD. If you need OPM - get a loan

[@sirano2006]

Sounds like with 2m revenue you still can’t figure to go to a valuation, if it wasn’t coming with cash-backs.

[@notpublic8961]

I wonder if Mikey even picked up on the point of this video that all those cash rewards are taxable... I also wonder how much Mikey pays in credit card fees since many vendors will charge for using a credit card. I also wonder if Mikey even knows.

[@mrnobody8540]

@@notpublic8961 People don't understand credit card is a game of chaining your future to death by enslavement... It's a tool to use for personal stuff and bills as long as you use it correctly... In business - it's not smart 🤓 - if you need a line of credit, open a bank account for that... Definitely don't mind debit cards - but cash is King 👑 -

[@mike2959]

@ lol. Funny guy. Only my grandpa calls me Mikey. And it’s called a rebate. As long as you spend something to get something it’s a rebate. Real simple.

[@rtel123]

It is crazy for any rules to exist, because it is not a gift or income. The merchants charge everyone more to pay the credit card companies transaction fees. When you get "rewards" they are just a partial REFUND of the credit card fees hidden in the price you paid.

[@mike2959]

Gosh. I really like the word rebate. Not cash back. Because if you had to spend something to get something by definition that’s a rebate right? Like purchasing a new car. I received a $2000.00 rebate on a 40k new car, I’m not aware of having to pay tax on that rebate. Hey speaking of rebates, my mom in the 1970’s would mail in every rebate on everything she purchased! She’s 72, I’ll tell her she’s getting audited.

[@MikeBeyene]

Got damn, this is helpful and detailed. Wild that this is free-game.

[@robertsalazar2770]

I must say your videos make me nervous. I use a CPA because tax the government makes me nervous. But thanks. You're providing good information.

[@crazyshrum]

Has Jasmine made a video about sweepstakes casinos and sweepstakes win from social casinos?

[@TexasEngineer]

A corollary question. What about state sales tax? In Texas the sales tax is paid on the net purchase at time of sales after discounts like store or manufacture’s coupons, but not mail in rebates. What are the rules for stores like Sam’s that give you a credit in your Sam’s account for a percentage of the purchase? The purchases comprise both sales tax and non-sales tax items.

[@tradeonthewire4634]

500 to 1000 an hour my estimate. Glad we are not charged for watching your content.

[@franciscanstudent]

Fellow LLM tax here Great job explaining the material! However, I think you'd get a different result if you were discussing referral bonuses that many CC issues pay to their users when they refer others to become card holders. These cannot be, IMHO, characterized as rebates on purchases, such as most sign-up bonuses are.

[@timmoore9736]

Good cear delivery!

[@mackmckay588]

Your presentation would have been more understandable if you had included a visual to show the process of the Visa gift card scenario rather than just reading the courts explanation.

[@alwaysrockn2009]

Your videos are awesome.

[@Drumbeat52]

If I don't receive a form 1099 or any forms from the bank, then I don't claim it. It's not my job to do the banks job. The IRS is form driven so no forms, no claims. My opinion.

[@jhustbie]

My opinion as well.

[@psdaengr911]

This has been reviewed by the IRS. Credit card rewards are viewed as rebates or discounts, not income, for personal purchases of goods and services because they do not affect personal tax deductions enough to be worth pursuing.

[@court2379]

Credit card rewards are a credit back on money you spent. A discount on the price, not income. Taxing them would be like taxing coupons. You saved $10, oh, your going to have to report that as income...

[@anthonyartol5]

I agree. Otherwise, taxing discount coupons at the grocery store would also be justified.

[@wouldntyouliketoknow9891]

no it is a debt forgiven, and forgiven debt is already taxable

[@court2379]

@wouldntyouliketoknow9891 Well I guess getting something on sale is a debt forgiven too. The MSRP is much higher. This is all a treading a thin line about the precise timing of when the money gets returned.

[@sprockkets]

Technically that money comes from businesses that pay for cc processing. It's a bullsht setup. The us has around 3% cc fees. The eu has .3%.

[@court2379]

@sprockkets No, it comes from the customer in the price of the product. The company then pays from that money the 3%. So getting some of that money back, is getting your own money back. But it can be argued multiple ways if you ignore the entire transaction and because the money changes hands three times. Customer, company, Visa, customer. The government is probably looking at only Visa and the customer. Which then looks like Visa is paying them and counting as income, but that ignores the entire transaction. Awfully convenient for them to ignore things like that in their favor...

[@FG-yx6eg]

I really appreciate you walking through the analysis. The topic is uninteresting, analysis good.

[@drewk75]

If they start taxing cash back people will try saying "Well I spent $100 to earn that $1 in cash back, so that $100 is an expense that I'm now going to deduct." Obviously that won't work, but people will try it.

[@JoeBleaux69]

Jasmine I’d be honored to help you with comment moderation. There’s tons of fake conversations under other comments directing people to get financial advice from influencers, if you’d like to knight me as a moderator I’d happily slay the spam dragons for you as aggressively or not aggressively as you like…but those recruiters in particular have to go

[@joshuaborem7063]

I received a tax document for mine last year. And I expect to again this year.

[@DuffyGabi]

Each year the owner where my wife works runs more than $2,000,000 through his American Express card! All for the points!

[@esw01407]

Very interesting, thank you for this breakdown!

[@markazcpa3]

Very good job.

[@Just_forfun9140]

Jasmine is a beautiful fragrant flower, a natural perfume of finest quality. This flower plant is grown in warm countries like India, you can get these plants in Indian stores in the west.

[@KishTalksCredit]

Thanks for sharing this information😊

[@richfranck8365]

Suggestion for Future Video: 1099 vs W2 for S-Corp's Reasonable Compensation A Virginia LLC treated as an S-corp is owned by a Wyoming single-member LLC. Rather than the S-corp paying W2 wages, the Reasonable Compensation could be paid to the WY LLC as 1099 management fees. "The IRS will reclassify all 1099-MISC payments made to S Corp owners as W-2 wages." However, in this scenario, the owner will be an LLC (with a management agreement with the S Corporation). Because the LLC owner is not an individual, it cannot be an employee, and cannot be issued a Form W-2, so under the IRS's own rules, it seems that the S Corporation would have to pay the LLC owner reasonable compensation as Form 1099 management fees.

[@WyattBOO]

Good job

[@normanhmath]

Credit Card rewards are the equivalent of a price discount on purchased goods, NOT INCOME. If anyone is interpreting them as income, they are in err.

[@eubankles]

Shhhheewwww! I have $3k saved up and this video made me NERVOUS! Wouldn’t surprise me if the IRS found a way in the future. Safe for now as mentioned…Great job once again!

[@acd2050]

Why is this not just consider a discount or sale on the cost of goods.

[@boy_named_niel]

I was under the impression they weren’t taxable because it wasn’t a net gain on income. Spending $100 to get $2 back didn’t get you $102 overall, but just a discount essentially. The same rationale applied to sign up bonus worth $1000, because you had to spend money to get money it was still treated like a discount

[@theBear89451]

For non-business expenses of $100, then yes.

[@notpublic8961]

Yeah, it's hard to watch your assumptions get obliterated, isn't it?

[@g.t.richardson6311]

send me a 1099 pompous rear end

[@robertsalazar2770]

I think that's what she said.

[@shaunbava1801]

That was my thought, the rewards are a rebate, it's an enticement to continue to conduct business with a vendor, they do points or cash back so they can hold the money. It is a different animal when you earn points/miles for a business expense and then redeem said points/miles for non-business expense. But I totally understand the logistics of trying to value miles or points as they generally do not have a cash value and can be redeemed at various values so there is no point in the IRS trying to tax these.

[@arequina]

Jamine, you're damn OP. Loving it.

[@oldmanx1234]

tax laws must be mandated so that the average person paying the tax can understand it.

[@drewn4344]

And to think our forefathers had a revolution over a mere 3% tax.

[@acd2050]

Most people pay that for just the swipe fee every time we use our cards. No not directly but since most of the population uses credit cards as their daily spend management its baked into the cost of all goods at this point.

[@TwZlr.]

The President Elect needs to see your content.

[@DavidNJ1]

Can you do one on RMDs, IRMAA, and Roth conversions?

[@vgmaestro]

Great information. Hope to win the Bradford tax law subscription 😊

[@butler3371]

What about cash back rewards on purchases that are reimbursed? My company lets me use my personal card for purchases and they reimburse me weekly. So I end up with a 2-3% gain on every purchase. So far haven’t really found any info in this situation.

[@hamonrye9823]

She's the best

[@dixter1652]

I have had to pay taxes on my frequent miles for years now.... when they report it to the IRS... then its taxable....

[@monkmoore]

Excellent. I would have like to seen the scenario of a business purchase reimbursed by the employer. Since no deduction is taken by the employee, I gather these would be taxable. However, some employees may incur interest charges between purchase and employer reimbursement which I wonder if adjusts their basis?

[@stephenlord8719]

How about, expenses paid with your credit card that your employer reimburses? You receive cash back on those credit card purchases you made on behalf of your employer?

[@drewn4344]

No law should ever be that complicated. And there are many laws that are. I see it as a form of entrapment, because not everyone can have a lawyer or CPA guide there every move.

[@MrGus.1]

Well done! A clear explanation of a murky subject.

[@joemunch58]

The IRS isn't bound by its "guidance." Bobrow v. Commissioner.

[@XEllC]

What actual tax law says taxes must be paid if they're stipulated as voluntary. They're either voluntary or they're not.

[@EminemHitman]

So I’ve heard of a crypto back card from Gemini. How does this fit into the whole system?

[@andrewjames2721]

What if I refer someone (without spending money) and receive points? From what I’ve seen online, those would be taxable because it is no longer a rebate.

[@anthonyhobson367]

Great question and I’m definitely interested in her response (hopefully)… but based on her comments this might falls into the category of not worth pursuing because it’s hard to place a definitive value on the points… 🤷🏽‍♂️🤷🏽‍♂️

[@andrewjames2721]

@@anthonyhobson367after watching the video, I feel like they could be classified in the same way for the same reason. Guess we’ll see.

[@richeastmain4031]

I’m sure the IRS will properly argue the next case. Thanks.