Seeking CC help/suggestions - Specific conditions

Great hustle, but please stop promising people it is tax free. AFAIK, you are not a tax attorney and this is far from being a clear stance from the IRS. (Please correct me if I’m wrong and you’d like to provide tax advice to all of us.)


I don’t mind providing tax advice to all of us. That is what forums like this are for…

The IRS has said they don’t consider credit card cash back to be income -

This letter seems like a valid and clear stance from the IRS.


Right, but the stated logic behind that position doesnt apply to buying CDs. It’s the best available guidance we have, but it’s also not on point.

The only answer is that there is no right answer. And whatever discussion or debate we get into over it, that is where it’ll end up.

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Only clear in that CC rewards are a reduction of the cost basis of the item purchased (like a rebate). If the item is subsequently sold for a profit, the CC rewards are very much taxable income. This part is 100% clear cut. Just being CC rewards doesn’t make them inherently untaxable.

Where it gets murky is when you reduce the cost basis on a financial instrument like a CD, or a money order, or a bill payment. That is a gray area that the IRS has no rulings on that I am aware of.

But please understand that it is a gray area. It is not clear.


shinobi has claimed that the IRS doesn’t care about what he’s doing, but we don’t know if he’s speaking from personal experience of being audited or not.

Yes, we would prefer that the IRS put it into the regs vs. a letter, but millions of us have been relying on this “gray” area for years and years. Sadly enough, “gray” areas from letters and rulings are a massive portion of the craptacular tax process.

Can we even possibly guess how much small businesses are spending to buy product with a credit card? I’m guessing that would be in the multiple billions of dollars per year, just in the US alone?

With the numbers involved and the long-time guidance from the IRS… I think I’ll keep enjoying my 2% cash back w/out concern.

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Right. The profits from this hustle, and I guess MS generally, are tax free at this time.

Now could the IRS review this matter in future and come up with a new approach to these profits? Of course they could. And I have no certainty as to the possibility of such a thing ensuing. I would observe the following:

When the government, any government, is in dire need of money, that entity often will review the situation and seek new sources of income through taxation of stuff which might have been, in the past, left alone.

I know the IRS is aware of MS generally and has decided, up to now, to leave it alone. The future is anyone’s guess. However:

MS implicitly profits most when turnover is highest. The “buy CDs with a CC” hustle is actually among the poorest MS opportunities in this regard, at three months (less time than that, I concede, for the really brilliant operators which I am not). Point is if the IRS changes its mind on taxation of these profits there will be plenty of opportunity for any practitioner to adjust his or her behavior accordingly.

The only remaining tax vulnerability would be taxation of past profits should thinking at the IRS change. I foresee zero likelihood of that outcome. I believe if the IRS should decide to go after MS profit they would do so, as a practical matter, on a “from this day forward” basis.

No, they are not. The IRS has never said that profits from MS are tax free. For a millionth time, the ruling mentioned above treats cash back as a reduction in cost basis. The maturity of a CD or cashing-in of a Money Order is disposition of the purchased product at a profit, because its purchase price was discounted by a rebate. The PROFIT includes that discount. And last I checked all profits were taxable.

All you are doing is justifying your own behavior to fit your desired outcome by relying on something that only sounds like it applies to your case. But I think even you understand how your logic might be flawed, so you’re pleading ignorance.

STOP CLAIMING THAT THIS PROFIT IS “TAX FREE”, because there’s no basis for this claim. Let everyone else decide for themselves whether these profits are taxable or not.


OK, Thanks shinobi.

I joined the Justice FCU 3mo CD .20% $2500 on my Citi Double Cash Card.
Done with maturity 2/1/21. Guess I won’t get rich, but quick deal… :blush:

No, I will not. The profits are tax free. Deal with it.

You may not post descriptions of methods for breaking any law on this site.

Your claim of these profits being “tax free” is not a settled matter, and may lead people to break the law (under-reporting income).

I believe your insistence on continuing to make this claim is violating the site rules.

Further, it would be in everyone’s interest to follow the first rule of Fight Club. Just post your deal and keep quiet about claims you can’t prove.


Tax evasion is illegal.

This is a finance site, we mostly talk about finance deals. We don’t talk about breaking the law, never have.

I don’t know why you’ve just tried to bring your politics into this – keep that in the political thread.

Look. If you think by hiding my posts you can change anything, think again. All that does is testify to your cowardice and unwillingness to engage in dialogue. But it does not make your thinking right . . . because nothing can do that.

I realize shutting down speech you dislike is the California way. Here where I live we have more courage than that and we are not cowards. Do whatever you want. You will still be wrong on this issue.

I’m not hiding your posts. I tried to engage with you. You seem to be on edge and everything is about politics for you now. This is a finance thread, keep it politics-free.

I explained why you might be wrong. Regardless of what opinion everyone holds and what they do in their own situation, many, if not most users here (and related blogs and websites) at least agree that taxation of MS profits is not a settled topic. Stop being so stubborn and stop making false claims that could create trouble for some people. It does not add any value to the discussion.

Well, somebody did. Sorry for the accusation if it was not you. Those who do so are able to shield their cowardice in anonymity on this site. This is wrong but not under my control.

Look, several years ago I investigated this. Found posts by MSers who spoke directly with the IRS. The IRS simply had no interest in the issue of MSing vis a vis taxation.

As I wrote above, this certainly could change going forward. But for now it’s all good.

I do understand how important taxation is generally in California. It’s one of many reasons I would never live there. When you spend more money than you have, that is how it works.

OK, now another one of my posts has been hidden, if not by you then by your liberal friends. We cannot have a dialogue under these circumstances.

And incidentally, in all the time I have been on this website I have never requested any other participant’s post be hidden regardless I have disagreed with a great many of 'em. Doing so is how communists behave. It’s not how we Americans operate.

See ya

Great, so this is your own personal excuse. But there is no official written rule. There isn’t even a private letter ruling that applies to you personally or to anyone else as far as we know. All you can do is present your best evidence (as you have) and I can present my best evidence (as I have) and let the readers draw their own conclusion.

Again you bring California into it, as if it is somehow related. I never told you or anyone else what I do with my own MS profits. For all you know I do the same thing as you, but I’d never share this information, nor would I ever encourage others to do the same without a clear written ruling on the subject. Like I said before, it’s best for everyone to follow the first rule of Fight Club.

I see what you’re talking about – your posts are temporarily hidden but they can still be viewed. Those hidden posts do not contribute to this dialogue – you didn’t explain or add anything, just attacked me personally for expressing a different opinion. They were probably flagged for either being off-topic or for violating site rules, not because someone “disagreed” with you.

I doubt you are correct. It is commonplace for liberals here to endeavor to hide posts which offend them. But again, if you did not do it I apologize for having accused you.

Heck, if I tried to hide posts here which offended me I would need to eradicate tens of other people’s posts. There is no fun for me in doing that. Everyone should be allowed to express themselves without harassment. But that is not how it works in, for example, San Francisco. People with Conservative views there get shouted down.

This site has clear rules which you should review often, because you often forget them. Here are just a few:

  • You can criticize ideas, not users.
  • No name-calling or ad hominem attacks.
  • Be civil. Don’t post anything that a reasonable person would consider offensive, abusive, or hate speech.
  • You may not post descriptions of, links to, or methods for stealing someone’s intellectual property (software, video, audio, images), or for breaking any other law.

Express away, just don’t break the rules.

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Look, you are saying that you have done your research and made a good faith effort to figure out what’s right. Whatever the IRS decides, now or in the future, you have a solid defense as far as the potential criminality if your conclusions dont match the IRS’s conclusions.

But if I’m ever audited, “Yeah, my buddy shin said I didnt have to claim it” isnt going to give me the same cover. I need to make my own good faith effort to determine the correct tax treatment. Your opinion and conclusions can certainly be part of what I consider when developing my own, but you are stating it as fact when it is not. No matter how confident you may be that you are right, it’s just an opinion - and your opinion isnt the one with the power to start sending tax deficiency notices. That’s all anyone is getting at.

You should take a breath. Outside of the election thread(s), we are all on the same side.