Ask An Accountant-Do I Claim Cash Back Rewards?

It’s tax time! My “Ask An Accountant” series should help with many questions that may arise. Remember, if you have a tax question, email my husband who is an experienced accountant at


I have made quite a bit of cash from free gift cards sent to me by Discover.  Do I have to pay taxes on cash back rewards from credit cards?


Per IRS guidelines Pub 17, a cash rebate you receive on an item you buy is not income.  You must however, reduce your basis(cost) in the item.  The basis reduction would only affect you if you ever sold the item, or placed the item in service in a business.


Please keep in mind this post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

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IRS Circular 230 Notice: Any U.S. tax advice in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions


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