Can you redeem business credit card rewards for personal use?

You can account for credit card rewards by recording them in the “Other Income” or “Credit Card Credit” sections of accounting software such as QuickBooks.

Here’s when you need to account for credit card rewards:

• Personal credit cards

  You only need to account for credit card rewards that you receive without having to spend any money. Examples of rewards you need to account for may include referral bonuses and any initial bonus with no spending requirement. The IRS considers these types of credit card rewards to be taxable income.... read full answer

  In contrast, the IRS treats spending-based credit card rewards as discounts rather than income. So, individuals don’t have to worry about keeping records of those for tax purposes.

• Business credit cards

  The rules are a bit different for business credit card rewards. You should keep track of any cash back, points, or miles you earn on a business credit card because you will have to subtract the value from your reported business expenses. They’re still discounts, but they’re discounts on a business expense, so the amount matters to the IRS.

All that said, U.S. tax law changes every year, and it’s full of nuance. If you have any concerns or questions about whether your credit card rewards count as taxable income, you should contact the IRS or a CPA to ask your question directly.

No, most business credit card rewards are generally not taxable, as they are not considered income. The IRS usually views most credit card rewards as discounts or rebates. But even though most rewards are not taxable, there are some strings attached with regards to deductible business expenses.

What you should know business credit card rewards when it comes to taxes:... read full answer

• While most rewards you get from your business credit card aren't taxable, the IRS will still expect you to subtract them from the business expenses you report.
• You'll have to consider the rewards as discounts on your business expenses, which will reduce the amount you're able to deduct on your taxes. You can only deduct the net cost of your purchases and any credit card rewards can lower that cost.
• So, if you made a $100 business purchase, you would normally be able to deduct the whole amount on your business taxes. But if you earned $10 on that purchase, its actual cost would only be $90, which is all you'd be able to deduct.
• Note there are a few particular situations when your business credit card rewards are taxable. For instance, if you receive a bonus without meeting any spending requirement, it would be considered taxable income.
• Referral bonuses are an example of bonuses with no spending requirement. Since these would be considered taxable income, some credit card companies may even send you a Form 1099-MISC to file with the IRS if you've been a recipient of such bonuses.

So, although most credit card rewards are not taxable, there can still be tax implications depending on how you use them. If you pay for business expenses with reward points or miles, you won’t be able to deduct those expenses as business purchases since you didn’t technically pay for them.

No, it is not illegal to use a business credit card for personal use. However, there are reasons you may not want to. After all, business credit cards are designed with business owners in mind, so the cards’ rewards and benefits are geared more toward business needs than consumer needs. Using a business credit card for personal expenses can also make things a little harder when it’s time to file your taxes. You cannot deduct any of the personal expenses charged to a business credit card as business purchases. If you do have too many deductions, it’s likely the IRS will get involved, and that can make things very painful.... read full answer

The rewards with business credit cards are also different from what a consumer might need. For instance, many business credit cards reward you most for expenses like office supplies and telecommunication services. Business credit cards often come with other features that aren’t as important for consumers, too. For instance, many business credit cards have very detailed expense tracking and spending reports.

Another reason to avoid using a business credit card for personal use is that business credit cards aren’t covered under the CARD Act. The Credit CARD Act of 2009 introduced a number of regulations to protect consumers from abusive practices by credit card issuers. However, business credit cards were excluded from the CARD Act. This means business credit card users don’t have to be given notice before their interest rates get increased, among other things. While many business credit card issuers have voluntarily extended the CARD Act protections, it’s not a requirement.

If you’re interested in a business credit card for personal use because of the rewards, you may be able to find a consumer credit card with rewards to fulfill your needs. There are lots of really good options available right now, including offers with big rewards bonuses and high credit limits.