It’s tax season. Have you started yours yet?

Earning rewards from banks and credit cards can feel like free money, but sometimes the IRS wants a cut. Whether you owe taxes on these perks depends on how you earned them. Usually, there is no tax withholding on these, so they may greatly reduce any refund.

The General Rule:

• Not Taxable If you had to spend money to earn the reward, it’s considered a rebate or discount. No tax owed.
• Taxable: If you received money or bonuses without spending, it’s considered income, and you may need to report it.

Taxable Rewards:

• Bank Account Bonuses – That $200 bonus for opening a checking account? Taxable. Banks usually send a 1099-INT or 1099-MISC for it.
• Interest Earned on Savings/Checking Accounts – Like any other income, it’s taxable.
• Referral Bonuses – If you got paid for referring a friend to open an account, it’s taxable income.

Not Taxable:

• Credit Card Signup Bonuses – If you had to spend (e.g., $3,000 in 3 months for a 50,000-point bonus), it’s a rebate, not income.
• Cash Back, Points, or Miles – Earned through purchases? No tax owed.
• Other Card Perks – Travel insurance, lounge access, flight upgrades, and retailer discounts are all non-taxable benefits.

Bottom Line:

Before celebrating your next bonus, check whether it comes with a tax bill. If it’s free money without spending, expect to report it. If you had to swipe your card to earn it, you’re likely in the clear!