Solved: Where do I report cash back incentives on a business credit card as income?
Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
TurboTax has you covered during Covid. Get the latest second stimulus info here.
cancel
Showing results for 
Search instead for 
Did you mean: 
New Member

Where do I report cash back incentives on a business credit card as income?

I own a small business and claim expenses purchased on a credit card.  The credit card give me cash back incentives on the total monthly amount spent.  Do I claim that as income for the business, and where do I report it?
1 Best answer

Accepted Solutions
New Member

Where do I report cash back incentives on a business credit card as income?

Credit card cash back rewards are not taxable income.  The IRS views these as discounts rather than income.  

For more information, please see TurboTax's guide to Cash Back Rewards.

View solution in original post

12 Replies
New Member

Where do I report cash back incentives on a business credit card as income?

Credit card cash back rewards are not taxable income.  The IRS views these as discounts rather than income.  

For more information, please see TurboTax's guide to Cash Back Rewards.

View solution in original post

New Member

Where do I report cash back incentives on a business credit card as income?

I heard that if it's on a business credit card where you have charges expenses, that you have to lower the value of your expense based on the cash back.  Since it's a monthly cash back amount, I wasn't sure if I needed to deduct the cash back item by item which would be an accounting nightmare.  Do I need to deduct it from the total expenses?
New Member

Where do I report cash back incentives on a business credit card as income?

@MB86 This would only be true if you were to purchase one item and you received a cash back reward specific to that one item.  In that case you would report the net amount you paid for that one item as an expense.

The IRS does not require that you reduce your business expenses or report as income the amount your receive as a cash back reward on your business credit card.
Level 2

Where do I report cash back incentives on a business credit card as income?

hello @ChelsiE2 do you have a source of any kind to cite for this. I just see conflicting info. I dont think CC points are ever tied to individual purchases but there are many articles saying to reduce overall expenses by the amount of rewards. thanks S

Level 15

Where do I report cash back incentives on a business credit card as income?

This is the same as if you returned a purchase and got a refund for the cost ... you simply reduce the expenses by the cash back amount.  

Level 15

Where do I report cash back incentives on a business credit card as income?

Assuming all purchases are made with a business credit card, and all cash back gets credited to the business income. There's three ways to do this, and one way is no better of worse than the other. You just pick what works best for you.

#1 - Reduce your expense by the amount of cash back received. This can be an accounting nightmare if you have a large number of purchases that qualify for the cash back incentive during the month.

#2 - Report the cash back as general business income.

Now others are screaming about #2 as "but wait! That makes it taxable income!" Yes, it absolutely does make it taxable income. The same exact amount of taxable income if you use #1 above.

#3 - List your credit card issuer (who you pay the bill to) as a vendor in your accounting software. When/if you pay the bill each month, it's recorded as paid to that vendor, including any interest for that month. If you need to separate out the interest payment on the credit card, that can be a sub-category for that vendor in your accounting software.  If you get cash back, it's a refund from that vendor and is recorded as a refund in your accounting software.

For #3, if you're using Quickbooks 2018 or newer I can talk you through setting this up in QB if you need help with that. Just make a backup of your current QB data file before we/you go changing things.

 

Level 15

Where do I report cash back incentives on a business credit card as income?

Agreed ... all 3 options can be OK to use as long as they are used consistently with your bookkeeping records to track the entries properly.  

Anonymous
Not applicable

Where do I report cash back incentives on a business credit card as income?

yes it's income since it reduces the amount you paid for deductible expenses.  for TT just pick up on line 5 of schedule C input form ( on the actual schedule C it will show up on line 6).  or if there are CC fees reduce them. 

Level 2

Where do I report cash back incentives on a business credit card as income?

yes, see more recent replies below 

Level 2

Where do I report cash back incentives on a business credit card as income?

thanks @Carl 

I will do solution 1 as I'd rather not increase my gross. Nearly all my transactions generate cash rewards; periodically redeemed into my checking. Cant I put them all in my largest expense category? or across a couple categories? doesnt sound too nightmarish. thx

Level 15

Where do I report cash back incentives on a business credit card as income?

Cant I put them all in my largest expense category? or across a couple categories?

Expenses go into whatever category applies to a specific expense - which it what I assume you've always done. The cash back just gets included in the general business income. I would expect that since the cash back is a traceable transaction, that's the way you'd need to do it to avoid raising eyebrows at the IRS. Especially if you ever get a tax reporting document (such as a 1099-MISC) for the cash back. But I think chances of that are rather negligible.

Level 15

Where do I report cash back incentives on a business credit card as income?

Do whatever seems reasonable for your bookkeeping system.  

Dynamic Ads
v
Privacy Settings