@@allthehacks "Credit cards points are not subject to tax." Is that always true? I agree for personal expenses. The way I usually hear it is "credit card points are considered a rebate." If the rebate is on a business expense, I would assume the IRS would consider the rebates as reducing your expenses; reducing them to the point where you are making a profit. Am I missing something?
@@JoseSantiago-yq7coyes and no. There’s a lot to tease out here and you should consult a tax professional. But if you use a cash back card intending to lower the cost of good purchased in order to generate a profit, then that should be considered your actual cost of goods. But if we’re talking about earning credit card bank points while purchasing business goods, that’s usually not factor in to your cost of goods. There’s also the gray area of how would you equate the credit card point to a fair value. Does MR = 0.6 cents per point or 1 cent per point? Remember banks do not generally publish this data and we’re not using TPG guideline as the source of truth 😂
In general, credit card sign up bonuses are NOT taxed. Referral bonuses are. If I get a 100k point sign up bonus, I probably won’t get a 1099. If I get 100k of referral bonuses, I can expect to get a 1099-MISC or 1099-INT for $1000. This is especially important when it comes to points from cards like Marriott. Marriott point value is generally like 0.6 to 0.8 cents per point but they value them as 1 cent per point in taxes. If you get 100k Marriott points from referrals (worth $600-$800), they will send you a 1099 for $1000
So the guy you mention doing 10 million in sales, when he gets his BOA cc 2.625% cash back, you mentioned it comes back as a rebate? And for sure its tax free?
@@allthehacks ok thanks. I know Kai had mentioned in his episodes that with buying group purchases and the resulting cash back from a card could be taxable but buying groups do not send 1099s its up to us to report it.
Great episode! Love Kai's podcast, so good to put a face to the voice, lol. Can't wait to hear the follow up episodes.
Thanks for watching! I loved it too!
First
What about paying by taxes on the bonus you receive? That hurts
Hard to complain about taxes on free money :) and credit card points and cash back aren’t’t subject to tax
@@allthehacks "Credit cards points are not subject to tax." Is that always true? I agree for personal expenses. The way I usually hear it is "credit card points are considered a rebate." If the rebate is on a business expense, I would assume the IRS would consider the rebates as reducing your expenses; reducing them to the point where you are making a profit. Am I missing something?
@@JoseSantiago-yq7coyes and no. There’s a lot to tease out here and you should consult a tax professional. But if you use a cash back card intending to lower the cost of good purchased in order to generate a profit, then that should be considered your actual cost of goods. But if we’re talking about earning credit card bank points while purchasing business goods, that’s usually not factor in to your cost of goods. There’s also the gray area of how would you equate the credit card point to a fair value. Does MR = 0.6 cents per point or 1 cent per point? Remember banks do not generally publish this data and we’re not using TPG guideline as the source of truth 😂
@@JoseSantiago-yq7co that is an excellent point that I’ve never heard discussed. I’ll do some digging
In general, credit card sign up bonuses are NOT taxed. Referral bonuses are.
If I get a 100k point sign up bonus, I probably won’t get a 1099. If I get 100k of referral bonuses, I can expect to get a 1099-MISC or 1099-INT for $1000.
This is especially important when it comes to points from cards like Marriott. Marriott point value is generally like 0.6 to 0.8 cents per point but they value them as 1 cent per point in taxes. If you get 100k Marriott points from referrals (worth $600-$800), they will send you a 1099 for $1000
So the guy you mention doing 10 million in sales, when he gets his BOA cc 2.625% cash back, you mentioned it comes back as a rebate? And for sure its tax free?
I’m not a cpa but my understanding is that it’s not taxable.
@@allthehacks ok thanks. I know Kai had mentioned in his episodes that with buying group purchases and the resulting cash back from a card could be taxable but buying groups do not send 1099s its up to us to report it.