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Is the cash-back award from my credit card (swept monthly into a brokerage account) subject to taxes?


Good news. The cash-back payments that you receive are all yours, tax free, assuming that they result from transactions made on the card. In the eyes of the Internal Revenue Service, that money is a discount on the price of whatever you purchased rather than income. In some cases, though, card issuers send money your way that isn’t tied to a specific transaction, say as an inducement to sign up for an account. Those payments, which you’re more likely to receive if you open a savings or checking account, are deemed miscellaneous taxable income. If the amount is $10 or more, then whoever makes the payment should send you an IRS Form 1099-INT alerting you to the tax liability, but any amount is taxable, no matter how small and even if you don’t receive the 1099-INT. And if you receive a non-cash gift – do banks still give toasters to new customers? – its cash value is considered taxable income.

-Conrad de Aenlle