Breaking News
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Are Credit Card Rewards Taxable?

Stock MarketsJul 30, 2021 14:45
Saved. See Saved Items.
This article has already been saved in your Saved Items
Are Credit Card Rewards Taxable?

Earning credit card points, miles, or cash back on rewards and cash-back cards is one of the easiest ways to put a little extra money back in your budget. In fact, with the sign-up bonuses and high earn rates on the best Canadian credit cards, it’s not rare for the average Canadian to bring in $500 to $1,000 in rewards in a single year.

But if you’re earning that much, you might wonder if the CRA considers that money taxable income. After all, they consider tips, gift cards for services performed, and ride shares as taxable income. Why not credit card rewards?

As it turns out, they are taxable — for a small portion of Canadians. Let’s take a look at when credit card rewards are considered taxable and when they’re not.

When are credit card rewards not taxable income? Fortunately, the majority of Canadian consumers don’t have to pay taxes on their credit card rewards. As long as you’re earning points, miles, or cash back for personal purchases (i.e., not for business purchases), the CRA will look at them as discounts and coupons, not income. Much like you don’t report savings from grocery coupons, you won’t report your credit card rewards on your tax filing.

When are credit card rewards considered taxable income? Things become a bit tricky when you earn points, miles, or cash back for business or work-related purchases. If you redeem them for cash, you might have to pay taxes.

For example, let’s say your company sends you to Toronto for a work-related conference. You use your credit card to buy a plane ticket, earning 400 miles in the process. Your company is going to reimburse the cost of the flight, which means you just earned 400 miles basically for nothing.

If you keep those miles as miles — that is, if you redeem them for flights or travel purchases in the future — the CRA won’t consider them taxable income. But if you redeem those 400 miles for cash, then you’d have to pay taxes on them. On your tax filing, you would declare the cash value of the miles, adding them to your taxable income.

To be clear, if you keep your points in your original form, you don’t have to pay taxes on them. It’s only when you convert points or miles from work-related expenses into cash that you have to pay taxes on them.

There’s one last instance that might trigger a tax event. Let’s go back to our example: you’re going to Toronto for a work-related conference. Let’s say you’ve been crushing it at work, and your employer wants to give you extra compensation. They tell you that you can use your rewards credit card to buy every employee’s plane ticket to the conference (let’s say there are 10). If you buy 10 plane tickets, you could earn 4,000 miles, which seems like a pretty good deal to you.

In that event, the CRA would consider the extra miles as taxable income, no matter if you convert them to cash or miles. Your employer would have to report their fair market value of the rewards on box 14 of your T4 slip. When you file your taxes, you would include this fair market value in your taxable income.

This is also true if your employer gives your miles, points, or cash back as an annual bonus. If they’re gifted to you, then you have to report them as taxable income.

Do you have to report your credit card rewards? Unless you earn points for work-related expenditures, and unless you redeem those points for cash, your credit card rewards are not considered taxable income. If you’re unsure, you can talk to your tax advisor about whether or not you should report your rewards.

The post Are Credit Card Rewards Taxable? appeared first on The Motley Fool Canada.

This Article Was First Published on The Motley Fool

Are Credit Card Rewards Taxable?

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email