Billing Credits from Service Providers to Home

[nlanglois7]

If one received a lot of credits on their internet and cellular bills (personal, not business), would they ever owe income tax on these?  These credits would have been for poor services received or customer dissatisfaction and would have zeroed out the bills as they rolled over from month to month.  I’m assuming these customer courtesies would be considered discounts.  I guess, the ultimate question is if there is a limit to the amount of billing credits one could receive from a service provider until they had to report it as income.

[xmasbaby0]

Having your phone bill lowered is not income.   It just means that less of your already taxed income will not be spent paying your phone bill.

[Opus 17]

The billing credits would potentially be taxable income if they exceeded the amount of the bill, that is, if the company was paying you to keep their service.  I would look at it on a annual basis, if the net result for the entire year was the company paid you, that amount is probably taxable.  Otherwise, discounts and rebates are not taxable.

[Critter-3]

If these were on a business phone  then the credits reduces the cost that you can deduct on the Sch C  but it is not entered as income. 

[nlanglois7]

In other words, if one paid the provider at all during the year, they would owe nothing in taxes, right?

[Critter-3]

If you pay $100 a month for your phone bill for a total of $1200 for the year but they refund you $100 then your deductible expense is only $900.   The refund is NOT entered as income is just reduces the deduction. 

Same as if you spent $500 on supplies at  Office Depot and you got a rebate of $50 then the deductible expense is only $450  but again the rebate is not also entered as income.

[xmasbaby0]

@Critter-3 The user said in the original question that the phone expenses were for personal phone bills---not business expenses.   If this is just their home phone bill and they got a credit on it, or even several credits, it should just be ignored.

"If one received a lot of credits on their internet and cellular bills (personal, not business), "

[Opus 17]

@nlanglois7 

Correct.  Discounts are not taxable, neither is getting a service for free.  If the rebates exceed the cost of the service, that will generally be taxable.  

[nlanglois7]

Okay, so the same principle would apply even if they gave me the phone itself for free on top of free services?  Similar to a car trade-in, as long as any discount does not exceed the cost that the new item is being purchased or traded for, there is no capital gains tax or income tax, correct?  Then again, this would only be taxable if they sent me actual cash or checked funds that exceeded the cost of the item being purchased.  And if it were taxable, I would probably receive a tax form from the vendor to include in my tax filings as other income reported, right?