Hmm… the media seems to be addressing all my questions today. This Wall Street Journal column addresses the taxation of credit card rebates:
The IRS hasn’t issued any specific public guidance on whether cash-back card rebates are subject to income tax, says an agency spokesman. But the IRS did issue a private-letter ruling in 2002 that said certain card rebates aren’t included in a taxpayer’s gross income. Although a private-letter ruling applies only to the taxpayer that applied for it, such rulings are considered to be a gauge of the agency’s thinking on a particular issue. Tax advisers say rebates are generally considered to be a reduction in purchase price, and not likely to be taxed. Rebates on purchases made for business or investment may have more complex treatment, so consult a tax adviser.
In short, the IRS hasn’t said anything specific either way, but has ruled in specific cases that they are not taxable. Although certainly not concrete, this is still reassuring as I personally have never reported any of my cashback as income.
I would estimate I pull in well over $1,000 a year in free money from credit cards, with my 2 to 5% back on all my purchases as well as signing up for $100 to $250 in upfront incentives. The great thing is that anyone with decent credit can get in on these offers. Article via Boston Gal’s Open Wallet.