NEW YORK ( MainStreet) -- Q: I heard that Citi Bank (C) sent 1099 forms to cardholders who earned frequent-flier miles through a special promotion. Are my credit card rewards points taxable?
Generally speaking, your rewards points aren't going to be taxable if you've earned them by charging purchases to your credit card.
| High sign-on bonuses may require you to fill out a form for the IRS.
As we've reported,
are essentially structured as a rebate and are not going to require you to pay taxes on the rewards at the end of the year. Extra points or dollars awarded as a sign-on bonus that has no spending threshold attached to it are a different story, though, should their value total $600 or more.
In the instance with Citi, the 1099 recipients had received more than 25,000 frequent-flier miles with
-- equal to $645 of taxable income -- when they opened a checking or savings account with the bank last year.
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"When frequent-flier miles are provided as a premium for opening a financial account, it can be a taxable situation subject to reporting under current law," IRS spokeswoman Michelle Eldridge says.
As such, it's important that cardholders pay attention to the size of the bonus and the structure of the promotional campaigns before they take advantage of them.
Additionally, "if taxpayers have questions about the information they receive on a Form 1099, they should follow up with the issuer or their tax professional to resolve any questions about valuation, timing or other issues regarding the income reported," Eldridge says.
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