Are Rewards from Business Credit Cards Taxable

Are Rewards from Business Credit Cards Taxable?

Due to the increased number of banks and various other credit card programs, the banking industry has become much more competitive. To compete with the other banks, many introduced credit card rewards programs to encourage businesspeople to inquire and utilize business cards from them.

Although it may vary from network to network, these rewards programs involve accumulating rewards points earned through forward rewards. So, are the rewards from business credit cards taxable?

Let’s explore the concept of taxing business credit card rewards in a bit more detail, understand what a business credit card is in greater detail, and also talk about ways they might differ from a personal credit card. Furthermore, we will also be discussing the opinion of the IRS on taxing business credit card rewards and whether these rewards are taxable or not.

What are Business Credit Cards?

Before understanding the rewards program associated with a business credit card and how are they different from your credit cards, let us first understand what a business credit card is and how it works.

What are Business Credit Cards

By definition, these types of cards are those designed solely for use by a business and not for personal use at all. The main reason why people tend to opt to get a business credit card is that organizations of any scope and scale can benefit from it.

Furthermore, another benefit to getting this type of card making is that it allows them to build up a credit profile on a corporate scale, which opens up many other profitable opportunities in the form of improvement in any borrowing terms availed in the future.

How it works is that business credit cards have a higher-than-normal interest rate, as compared to when taking personal loans, because credit card debt accrued using a business card is unsecured, which means that there is a higher risk for the lender in this case.

Different Types of Business Credit Card Rewards

1. Cashback: Many business credit cards offer cashback rewards on eligible purchases. This can help your company save money and offset expenses.

2. Travel Rewards: Business credit cards often come with travel rewards programs that allow you to earn points or miles for every dollar spent. These rewards can be redeemed for flights, hotel stays, car rentals, and other travel-related expenses.

3. Insurance Coverage: Some business credit cards provide additional insurance coverage, such as rental car insurance, travel accident insurance, or purchase protection. This can provide peace of mind and protect your company from unexpected financial losses.

4. Special Offers: Business credit card issuers often partner with companies to provide exclusive discounts and special offers. These can include discounted rates on office supplies, software subscriptions, or even access to business lounges at airports.

5. Expense Management Tools: Many business credit card providers offer online platforms or mobile apps that help you track and categorize your business expenses. This makes monitoring your spending easier, simplifying bookkeeping and streamlining tax preparation.

6. Rewards for Employee Spending: Some business credit cards allow you to issue additional cards to your employees. This not only helps you track their spending but also allows you to earn rewards on their purchases, which can further benefit your business.

Benefits of Owning a Business Credit Card

Benefits of Owning a Business Credit Card
  • Exclusive Benefits

One of the main selling points of opting for a business credit card is that it provides certain benefits that cannot be redeemed using a personal card.

An example is that several business credit cards offer businesses cash back when purchasing items from select stores, which are usually the ones the business may frequent.

In addition, these types of credit cards also provide a business with greater sign-up rewards as opposed to personal variation since organizations and companies tend to spend a greater amount of money when compared to the general public’s expenditure.

Furthermore, banks understand that business people frequently travel to conventions and meetings. Due to this, they offer several business-exclusive travel perks as well. An example is that a card may entitle a businessperson to access the VIP lounge located in an airport.

Furthermore, some business credit card issuing companies also offer additional perks in the form of possible discounts when staying at hotels during a business trip.

  • Managing Expenses

In addition to offering exclusive business-related perks and benefits, another advantage of owning a business credit card is that they are instrumental in managing finances and other business-related expenses.

Not only do business cards include all of the benefits and conveniences offered by personal credit cards, but they also have additional options that can further assist your business in saving up for future investment.

This variation of the credit card provides company owners with tools that enable them to efficiently separate their work-related expenses from any personal expenses they might have.

This is especially useful for businesses because it not only allows the accounting department to properly handle business expenses without the hassle of having to sift through personal expenditures, but it also allows the business to monitor all of their business-related purchases.

  • Separate Business and Personal Expenses

One key advantage of using a business credit card is the ability to separate business and personal expenses. This is crucial for small businesses as it helps maintain clear financial records and simplifies bookkeeping. You can easily track and categorize your transactions by using a business credit card for all business-related expenses. This allows for more accurate record-keeping and simplifies preparing financial statements, calculating taxes, and monitoring your business’s financial health.

When you have dedicated business card transactions, keeping track of your spending becomes easier. Most business credit cards provide detailed monthly statements that categorize expenses, allowing you to analyze your spending patterns and identify areas where you can cut costs or optimize your budget.

Separating business and personal expenses simplifies the tax filing process. You won’t have to sift through personal transactions to identify deductible business expenses. Instead, you can easily identify and report your business expenses, potentially reducing your tax liability and avoiding any potential IRS audits.

  • Access to Higher Credit Limits

A business credit card offers the advantage of accessing higher credit limits compared to personal cards. This increased credit limit can be beneficial for small businesses as it provides financial flexibility and the ability to handle larger expenses. With a higher credit limit, businesses can make larger purchases without the worry of exceeding their credit capacity. This can be especially helpful during periods of growth, when businesses may require additional funds for expansion or investment opportunities.

Furthermore, a higher credit limit can also improve the company’s credit utilization ratio, which is an important factor lenders consider when evaluating a business’s creditworthiness. By responsibly utilizing a higher credit limit, businesses can demonstrate their ability to manage credit effectively, potentially leading to better lending terms in the future.

Are Rewards from Business Credit Cards Taxable? What the IRS Says About This

Are Credit Card Rewards Taxable

Now that we have understood what a business credit card is and the benefits associated with it, due to which so many business people own these cards, let us explore the concept surrounding taxing business credit card rewards and what the IRS has to say about this.

The IRS, also known as the Internal Revenue Service, is a federal agency whose main purpose is to enforce certain tax laws and collect tax from every law-abiding citizen and business in the United States.

Their opinion on tax-related is of the utmost importance because they hold great authority over every corporate organization and civilian as well.

When announcing its stance on business credit card rewards and taxes, this agency exclaimed that it would not be asserting any taxation on cashback rewards, provided that the redeemed reward is based on a percentage of business spending.

The IRS made this decision primarily because this would allow the business owner to get a rebate on the money they have spent in the form of corporate expenses.

Furthermore, the other benefits the IRS has mentioned are free from taxation, including frequent flier miles and various other perks similar to this.

Business Credit Card Rewards and Taxes: When Are They Taxable?

When considering what sort of taxes a business might be liable for, this may apply when a literal transaction has not been made.

This means that the organization that issued the card to the holder may have a special bonus offer involving a cash reward when opening an account.

When considering such a case, if the money has been credited to your account before it has been used for any transaction, then that money would not be a part of any monetary exchange and would not count as income.

When dealing with such a situation, the cashback you have received would indirectly count as interest your business has earned. Because it counts as interest, it would be subject to taxes.

Would Business Purchases Be Taxed As Well?

When dealing with expenditures made by business credit cards, although a similar rule may be applied, additional considerations must be taken into account.

An example of this may be that you may be a business owner who has to travel somewhere to attend a conference and spend a certain amount of money in the form of travel expenses, swiping them with your business card, after which they offer a certain cashback amount due to possible perks.

When dealing with such a situation, because the cashback is considered a reward and does not contribute to your income, it would be pocketed as a personal reward, and taxation would not be applied in this case.

However, when reporting the expenses to the accounting department, the business person should not report the cashback reward as a part of business expenses because it is considered a cashback reward.

Keeping this example in mind, it can be deduced that any rewards accrued from using a business credit card can be used to fulfill personal expenses without having to resort to paying any tax on them. However, you would also have to subtract that cashback amount from your business expenses. 

Is Credit Card Reward Distribution Possible?

Due to the frequent business trips and significant expenditures made by businesses, these cards can amass a sizeable amount of money and miles in the form of rewards the issuer provides.

Due to this, a business person would often want to give them away, either due to a personal agenda or in the form of charity for a business.

When dealing with such a situation, the IRS recognizes these expenses as transactions between a business and an individual. Due to this, they are not considered to be tax deductible.


To summarize all the information involved with business credit card rewards and taxes, the rewards you would amass from using your business credit card in the form of miles and cash back would not be considered taxable.

However, that is not always the case, and certain conditions depend on how you use these rewards.

Many business owners can use this to their advantage by availing of cashback rewards and frequent flier miles that they have gathered on their business cards to go on personal trips and use the cashback rewards to spend on themselves.


  1. Are rewards earned from business credit cards considered taxable income?

    The IRS considers business credit card rewards as rebates or discounts, not income. Therefore, the rewards from business credits are not taxable.

  2. Are cash-back rewards counted as taxable income?

    No. Cash-back rewards obtained from business credit cards are not taxable. They are not considered as income but as rebates or discounts.

  3. Are there any exceptions to the non-taxable status of credit card rewards?

    Yes, there are exceptions only if you receive rewards as a result of a business expense but then later receive reimbursement for that expense; the value of the rewards may be considered taxable income.

  4. How should I report taxable credit card rewards to the IRS?

    If you have taxable credit card rewards, you should report them as miscellaneous income on your tax return. Use Form 1099-MISC to report the income if applicable.

  5. What documentation should I keep for credit card rewards?

    Always save statements, receipts, and any other relevant documentation to support your reporting in case of an IRS audit.

  6. Can I deduct the annual business credit card fees as a business expense?

    Yes, business credit card annual fees is deductible as a business expense. Remember, personal expenses are not deductible.

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