How do I account for credit card rewards?

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.

  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.