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Tax Law (Questions About Taxes)/Credit card's "cash back"


QUESTION: Like many others I receive "cash back" from my credit card company. Since the company doesn't send me a 1099, I presume the cash back is not taxable. This cash back is not a reduction in the fee I pay, as I pay no fee. My question is: If the cash back is indeed not taxable, what is the rationale for so excluding it from taxable income?

ANSWER: Richard,

Thanks for your question.

It is indeed not taxable. It is simply treated as a reduction in the price of whatever you purchased. You don't get income by buying something.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: Many thanks, John, for your exceedingly prompt response. I'm still perplexed, however. I don't know how the cash back can be considered a "reduction in the price of whatever you purchased," when, as I indicated, there was no price that I paid. (Remuneration to the company does not come from me.) Can you clarify?

It is a legal, tax two-step. You did not purchase anything from the credit card company but you purchased from firms that use their company, so the cash back is a refund or reduction of your purchase price.


I am quite disappointed in your rating and in your failure to read what I am telling you. I said that it is treated as a reduction in the price.  I acknowledge that you the discount is from the credit card company and not from the company you purchase the goods from.  Given these facts, however, the cash back, for tax and legal purposes is treated as a reduction in the price of the goods or services purchased. Strictly speaking, it is not a reduction of the purchase price, but THAT IS HOW IT IS TREATED.

Your ignorance has given me a very low rating. My answer was clear, and I am extremely knowledgeable in tax matters, this one included. You are simply refusing to accept what the answer is.

John Stancil, CPA

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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