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ajdomeyer
New Member

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

Can a cash back rewards check go into a personal account or does it have to stay in the business?  

9 Replies
tagteam
Level 15

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

The portion of the credit card purchases that you receive back in cash does not constitute gross income (i.e., not taxable).

 

See https://www.irs.gov/pub/irs-wd/1027015.pdf

 

However, if the purchase was a business expense, you cannot deduct the portion you receive in cash back from your business income (e.g., You purchase $500 in office supplies and receive $25 cash back. You can deduct $475 ($500 less the $25 "discount").

 

See https://turbotax.intuit.com/tax-tips/irs-tax-return/video-are-cash-back-rewards-taxable-income/L1FWH...

Coleen3
Intuit Alumni

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

If the cash back is through your business then it can't automatically be credited to personal. Yes, it is income.

ajdomeyer
New Member

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

Thank you, that is what I have been doing.  But someone told me I was doing it wrong.
ajdomeyer
New Member

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

another question - i just saw that my CC company allows you to redeem the cash back for gift cards.  Can I do that and then use them?
Coleen3
Intuit Alumni

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

Can you explain that further?
Opus 17
Level 15

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

It's complicated.  For personal purchases, cashback is not taxable.  It is treated as a discount of the merchant fee charged by the credit card and passed on to customers, and discounts, like coupons, are not taxable.

However, when used for business, what you basically have is a discount that reduces your cost of goods (your inventory cost).  You should probably reduce your inventory cost by the amount of the rebate check (which will increase your net profit.)  It is probably easier to report the check as income, which has the same result in the end.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
ajdomeyer
New Member

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

My credit card company gives 2% cash back (the business CC).  You can take a check or you can redeem the cash back for gift cards.  If I wanted to redeem the cash back for gift cards rather than taking a check, how would that work?
Coleen3
Intuit Alumni

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

The bottom line is you can't have a discount of any type without accounting for it. If you Merchant Services account expense is $100 per month and then they give you 2% back in any form, then you have to account for that 2% difference.It can't be a freebee.
ajdomeyer
New Member

I own a business and have a CC w/cash back that I use to pay it off.If I take a check is it taxable income?Can it go into my acct or does it have to go in business?

Sounds good, thank you.  I'm just going to keep using it to pay off the balance which is what I have been doing.
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