Are bank bonuses taxable? Here is what you actually keep.
Bank account bonuses count as interest income. The bank sends a Form 1099-INT and you pay ordinary income tax at your marginal rate, federal and usually state. Credit card bonuses earned by spending are treated as a rebate and are normally not taxed. Enter your numbers below to see the after tax figure to plan around.
How bank bonus taxes work
Cash bonuses are interest. Open a checking account, meet the direct deposit requirement, get $300. That $300 is interest income in the year it is paid, not the year you opened the account. If your total interest at that bank hits $10 or more, you get a 1099-INT in January or February.
Brokerage transfer bonuses are usually taxed too. Most brokers report cash-for-transfer promotions as interest or other income. Some spread the payment over months, which can split the tax across two calendar years.
Credit card welcome bonuses are usually not taxed. Points or cash earned by spending are a rebate on your own purchases. A bonus that requires no spend, or a referral bonus paid to you, can be reported on a 1099-MISC.
Plan for it while you chase. A year of steady bonus hunting can add a few thousand dollars of taxable income. Setting aside the rate this calculator shows keeps April boring.
Questions people actually ask
Are bank account bonuses taxable?
Yes. A checking or savings account bonus is almost always treated as interest income. The bank reports it on Form 1099-INT (sometimes 1099-MISC) when your total interest from that bank reaches $10 for the year, and you owe ordinary income tax on it at your marginal rate.
Are credit card sign-up bonuses taxable?
Usually not. A card bonus earned by spending money is treated as a rebate on that spending, not income, so it is not taxed. A bonus paid just for opening the account or for a referral can be taxed and can show up on a 1099-MISC.
What if I never get a 1099?
The income is still reportable. Banks only have to send a 1099-INT at $10 or more of interest, but the law does not set a floor on what you owe. Keep your own list of bonuses paid during the year.
Do I pay state tax on a bank bonus too?
In most states, yes, at your state's ordinary income rate. Nine states have no broad income tax, so a bonus there is taxed federally only.
Can I deduct the cost of chasing bonuses?
For almost everyone, no. Monthly maintenance fees, early closure fees, and wire fees are personal expenses and are not deductible, which is a good reason to avoid offers that only work after you pay a fee.