Can we get a 20% tax savings for bank bonuses?

Is there a way to treat our churning hobby as a business? I’d like to get a 20% reduction in taxes for my bank bonuses.

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Yes. Make a profit in (at least) two out of five years and keep detailed records of your operating, marketing, and sales activities to demonstrate you ran it as a business.

I don’t think you can reclassify interest payments as business income. But if the bonuses were from business accounts, I could see it.

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And credit cards presumably you aren’t reporting as income (since IRS says is unnecessary), so there’s nothing to deduct unless you voluntarily increase your taxes.

It’s a common misconception - I’m not aware of the IRS ever saying credit card bonuses weren’t income per se (or even rewards earned from credit card purchases). At the very least, be ready to pay tax on this income if you’re treating it as your entire business activity.

I think the announcement you’re referring to is the IRS saying they weren’t going to assert tax liability as a result of miles (and similar travel rewards) earned by business travelers where the company was paying for the travel (i.e. in that specific scenario, miles are not a taxable fringe benefit).

Note that they specifically do not state that the miles aren’t income. They basically say it’s just too hard to enforce/keep track of so we’re going to let companies and individuals know they don’t have to worry about dealing with the complicated issues involved.

It isnt “credit cards”, its a bonus that is earned through spending so that it is a “rebate”. Generally that fits credit card bonuses, while deposit account bonuses are deposit based and thus taxable (there is no required spending to be “rebated”). But those “Use your debit card 5 times and get a $20 bonus” should fall into the rebate category, even if banks are too lazy to separate them from interest earnings.

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My own rewards arrive in the form of hard currency only . . . no miles or anything else. Just dollars.

I had plenty of such rewards in 2017, from several sources.

In no instance was a 1099 generated as a result of dollar rewards paid to me.

Absent a 1099, the IRS has no practical means to become aware of my rewards.

The IRS can go pound sand if they anticipate tax payment from me on rewards of which they are unaware.

When taxability of rewards becomes generally accepted, payers of rewards will commence issuance of 1099s. And not before.

That’s paraphrasing what the IRS has said - that rebates are not taxable income. Generally credit card bonuses are tied to spending requirements, so people are just leaving out the technicalities behind it when saying a credit card reward is not income.

Only that’s not how it works, no matter how much you want to pound your fist on the table insisting otherwise.

You may get away with such things, but in a public forum we should be clear as to the correct answer, verses our opinion of how it should be.

I agree. But here we’re talking about turning it into a “trade or business.” Which means there has to be an intent to profit. Either the person would be MSing and the “rebate” results in taxable income because it is either a cash equivalent or exceeds the now reduced basis in whatever is purchased, or the person is not MSing and there’s no trade or business because there’s no “profit intent”.

If you get $100 cash back for a purchase of something which costs $50, $50 of the cash back is a reduction in basis of that item, but then you have $50 remaining that can’t reduce the basis of any property. This scenario (or an extended/more elaborate version with more steps) is the only way to “profit” from this activity.

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Pass a law. Then everyone will know “how it works”.

No amount of internet punditry will be sufficient to make me pay tax I do not have to pay. I do not “guilt” easily. And neither should anyone else.

There is a law. It clearly says you have to report all your income, not that you only have to report what someone else already told the IRS about.


In a trade or business, all rebates are taxable. Because the expenses used to earn those rebates are deductible.

Personal rebates are not income because you generally cannot deduct the personal expenses that earned those rebates.

Whatever. I’m not paying. And neither is anyone else with an ounce of sense.

Try to collect. :rofl:

Not necessarily, there are plenty of examples of expenses which are not deductible, or which must be capitalized. Additionally, just because the activity is a trade or business (to be clear I’m not saying I think this activity qualifies as a trade or business, just assuming it is for purposes of discussion), doesn’t mean the purchase of some item is a business expense (deductible or otherwise).

However, the mechanics, as the IRS has asserted, are that the points/rewards are a reduction in expense from the original purchase. That means that there’s no income until the cost of the expense is reduced to $0. Anything above that is income. As a business, if you purchase office supplies for $100 and get $50 cash back on that purchase, you’re deductible expense amount is $50 which brings your tax basis in the asset down to $0. If you later dispose of those office supplies, anything you get in return is taxable income.

That’s not the theoretical reason why personal rebates aren’t income. It ends up that way because generally the purchase price of an item exceeds the rebate amount and one would rarely resell a personal purchase for an amount greater than his/her tax basis (because no tax deductions are allowed so the basis is not reduced down to zero by tax deductions).

Other than that, imagine the dollar coin scenario. You are purchasing US currency which, by rule, cannot have a basis different from its value. Therefore, you can’t reduce the basis on the dollar coin and thus any rebates (personal or business) from the credit card company are taxable (theoretically).


Having to pay 15% SE tax on business income is a big reason not to want to be a business.

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I think OP is talking about Bank signup bonuses for say opening a checking or savings account, not credit card bonuses.

I’ve received 1099INT forms for bank sign up bonuses because they categorize those as interest income (I’m guessing since that’s the only product some banks have that’s close to that).

To consider those as business income, I think you’d have to make a case for the business itself first. IRS defines business as something that produces income from selling of goods or services. I’m not seeing what service you provide the banks you take advantage of by milking their signup bonuses. I’m sure you could spin it (freelance hired customer service? lol) but if IRS audits and rules that it’s not a valid business, I think you’d owe back taxes and penalty for misrepresenting that income.

Besides how much tax savings would it be for the hassle of filing schedule C and higher risk of audit? At least for me, the bank account signup bonuses are much smaller than the credit card ones. And that’s for personal checking/saving accounts. I see much fewer signup bonus offers for business accounts which they would surely have to be to claim that those were business income, not personal income.


Agree except for the part about bank signup bonuses being smaller than credit card bonuses. I made more in bank bonuses last year than in 5 years of CC bonuses.

would be nice if we could deduct inflation/debasement, even at the official rate

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