The hidden cost of helping friends earn more credit card rewards
By Sara Rathner | NerdWallet
Thanks to travel rewards credit cards, you summer like a celebrity for the cost of a staycation, and your friends are starting to notice. There’s no reason to gatekeep your travel secrets — the more friends know about how to earn valuable rewards, the more who will join you on epic and deeply discounted adventures.
Not only do you take the time to answer their credit card questions, but you also send referral links if you carry a card they’re interested in applying for. If they end up getting a card with your referral, they can earn a generous sign-up bonus by meeting the card’s spending requirement, and you get “paid” for your time and expertise by getting a referral bonus.
But there might be a catch. That referral bonus can come with a tax bill.
How the IRS looks at credit card rewards
You may owe taxes on some credit card rewards, depending on how you earn them and the dollar value of what you redeem.
“If you have to spend money for it — for example, you get a bonus after spending $3,000 within a certain time frame — then, it‘s not taxable,” Luis F. Rosa, a certified financial planner and enrolled agent in Las Vegas, said in an email. “However, if no money was spent and it was just an incentive, then, the income is taxable.”