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intricacies of taxable income (U.S.)
Sunday, April 2nd, 2023 12:08 amThings like this always slow me down when doing my taxes, even though I keep notes so as to not have to look up things I've already determined in prior years.
Based on what I've read (sources listed below):
Credit card rewards are considered rebates and not taxable.
Credit card sign-up bonuses are also considered rebates and not taxable, as long as they required spending some amount to get the rebate.
Bank account sign-up bonuses, as they typically don't require spending any money, are taxable.
Bank bonuses for referring friends, as they typically don't require spending any money, are taxable.
This makes me wonder about cell-phone plan (and such) bonuses for referring friends. I would deduce that because you can only get these bonuses while you are a paying customer of the cell-phone company, the bonuses are considered rebates and not taxable.
I have a reloadable pre-paid Bluebird card. Last year, Bluebird gave me a $30 bonus for having direct-deposited my IRS tax refund to the card account.
Based on what I read, I deduce that it is taxable, and that it should be included under the line for "Other Income" on Schedule 1. Oh, the irony.
https://www.businessinsider.com/personal-finance/are-credit-card-rewards-taxable
https://thepointsguy.com/news/tax-on-rewards-ruling/
https://www.classaction.org/blog/are-class-action-lawsuit-settlements-taxable
..
OMG. Some things make me laugh.
Publication 17, Tax Guide 2022
Bribes. If you receive a bribe, include it in your income.
Ah, page 71-72 specifically discusses lawsuit settlement amounts in the section "Court awards and damages".
Hmm, I wouldn't have guessed this:
Found property. If you find and keep property that doesn’t belong to you that has been lost or abandoned (treasure trove), it’s taxable to you at its fair market value in the first year it’s your undisputed possession.
Oh jeez, this oddity is taxable and even has it's own section in the tax guide?
Free tour. If you received a free tour from a travel agency for organizing a group of tourists,
you must include its value in your income...
OMG! LOL!
Illegal activities. Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) if from your self-employment activity.
Dang. Every time you sell a used item of yours, you're supposed to report it:
Sale of personal items. If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain. Report it as explained in the Instructions for Schedule D (Form 1040).
Thank you IRS, for making this task amusing, even though reading this is delaying me from actually starting:
Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year.
Based on what I've read (sources listed below):
Credit card rewards are considered rebates and not taxable.
Credit card sign-up bonuses are also considered rebates and not taxable, as long as they required spending some amount to get the rebate.
Bank account sign-up bonuses, as they typically don't require spending any money, are taxable.
Bank bonuses for referring friends, as they typically don't require spending any money, are taxable.
This makes me wonder about cell-phone plan (and such) bonuses for referring friends. I would deduce that because you can only get these bonuses while you are a paying customer of the cell-phone company, the bonuses are considered rebates and not taxable.
I have a reloadable pre-paid Bluebird card. Last year, Bluebird gave me a $30 bonus for having direct-deposited my IRS tax refund to the card account.
Based on what I read, I deduce that it is taxable, and that it should be included under the line for "Other Income" on Schedule 1. Oh, the irony.
https://www.businessinsider.com/personal-finance/are-credit-card-rewards-taxable
https://thepointsguy.com/news/tax-on-rewards-ruling/
https://www.classaction.org/blog/are-class-action-lawsuit-settlements-taxable
..
OMG. Some things make me laugh.
Publication 17, Tax Guide 2022
Bribes. If you receive a bribe, include it in your income.
Ah, page 71-72 specifically discusses lawsuit settlement amounts in the section "Court awards and damages".
Hmm, I wouldn't have guessed this:
Found property. If you find and keep property that doesn’t belong to you that has been lost or abandoned (treasure trove), it’s taxable to you at its fair market value in the first year it’s your undisputed possession.
Oh jeez, this oddity is taxable and even has it's own section in the tax guide?
Free tour. If you received a free tour from a travel agency for organizing a group of tourists,
you must include its value in your income...
OMG! LOL!
Illegal activities. Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) if from your self-employment activity.
Dang. Every time you sell a used item of yours, you're supposed to report it:
Sale of personal items. If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain. Report it as explained in the Instructions for Schedule D (Form 1040).
Thank you IRS, for making this task amusing, even though reading this is delaying me from actually starting:
Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year.