Are there tax implications for cashing out credit card points and miles?

With tax season quickly approaching, gathering documents, figuring out how much you owe and preparing to file can raise plenty of questions. For points and miles enthusiasts, there are extra factors to consider as well.

“Can I cash out my points and miles?” is a common question. We’ve previously discussed your options for cashing out your points and miles and whether it’s worth doing in terms of the value you’ll get.

Any discussion of cashing out points and miles leads to the follow-up question: Are there tax implications? We consulted with a tax specialist to determine what — if any — tax implications apply to people who decide to cash out their points.

Read on to learn more as you file your taxes this spring.

Related: Are your credit card rewards taxable? Here’s why you’re receiving 1099s in the mail

Let’s say you spend money on your credit card in bonus categories where you earn extra points or you earn a welcome bonus on a credit card after spending a certain amount of money across a set time period. We know that banks sometimes send out 1099s for referral bonuses and other credit card perks, so what about these credit card rewards? If you opt to cash out the points or miles you’ve earned on a credit card, is that taxable?

There’s a clearer picture when it comes to personal use of rewards earned by making purchases on a credit card.

“The IRS treats those rewards as discounts or rebates and not as taxable income; so the general rule of thumb, no, not taxable from a personal level,” said Jackie Meyer, a certified public accountant and founder of tax advisory software TaxPlanIQ.

Meyer notes that the matter could become more complicated from a business spending perspective. This is because the value of credit card rewards could be subtracted from total business expenses.

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Even then, Meyer says she hasn’t seen the IRS go after anyone for this. She noted that there isn’t “really any regulation around it.”

“If someone is getting into the business realm, then it definitely can make it more complex, and the value of those rewards could technically have to be subtracted from total business expenses that are claimed,” Meyer said. “In practicality, have I ever seen someone do that? No. And I haven’t seen a case where the IRS has pursued someone around that either. So it’s a gray area.”

Related: Can you pay taxes with a credit card?

Meyer advises points and miles enthusiasts to use their credit card rewards on personal spending to avoid complexities.

“As a business owner and serial entrepreneur myself, I would say I rack up a lot of points personally and through the business, and I try to utilize those points toward personal things so that it doesn’t cross that line of the business nature and turn it into a more complex topic,” Meyer said. “So if you have a choice between using your points toward personal matters versus business, I would lean toward the personal.”

Again, there are times when earning points or miles may have tax implications. This is sometimes the case with referral bonuses, which are rewards accumulated without actually making a purchase. But overall, if you earn your credit card points and miles through purchases and cash them out for personal use, there’s likely no need to claim it on your taxes.

The good news is that the IRS does not have a history of seeing credit card rewards as income. From our understanding — and from consulting with a CPA — most people who cash out their credit card rewards shouldn’t need to claim this on their taxes.

However, if you have questions about tax filing requirements for your particular situation related to points and miles, cashing out your points and miles or anything else, you should seek guidance from your tax preparer or a tax attorney.