Apple’s never-dying measures to keep its users happy has led to the Apple Card invention. The convenience and rewards are a clear-cut benefit, but on an IRS’ end, it could see you scratching your head. Apple’s credit card raises several questions, the primary concern being how it will affect the taxpayers’ burden.
IRS’ stand on credit card rewards is quite definite. However, businesses and private citizens will be affected differently. Following the IRS stand, credit card rewards can be treated as taxable income.
Apple’s card for personal expenses
When you use your Apple card for personal expenses, the rewards are, in most cases, seen as discounts rather than income. However, there are instances where the rewards qualify as taxable income. If you are not aware of how the rewards affect your tax burden, it is advisable to seek professional assistance, not necessarily from the issuer, in this case, Apple, but from an independent tax expert.
If your Apple card’s rewards are accumulated points towards future purchases, cash-back, or travel miles bonuses, then they qualify as discounts and IRS will not tax you. For the sign-up bonuses, however, IRS requires that you receive the bonus after a financial transaction to qualify as a non-taxable income. It means that, if the sign-up bonuses do not require you to, for instance, recharge your card or transact before you realize the rewards, you will have to document the rewards on the 1099 form.
What’s more, a reward qualifying as taxable doesn’t necessarily have to be cash. Tangible gifts and rewards such as airline miles among other valuable gifts also qualify as taxable income. IRS’s unforgiving whip may strike when you least expect it, as such, even if you feel that the rewards don’t qualify as taxable income, you are better off reporting them or consulting an expert before filing your taxes.
Apple card for business use
When you use your Apple card for your business, the rewards are subtracted from your expenses. Let’s say you made a purchase worth $1000 and received a 10% reward ($100). As you report it to the IRS, you will not deduct an expense of $1000; instead, it will be minus the $100, hence $900. It means that, though the rewards are not taxable income, the results increase your tax burden.
There are various ways you can reduce your tax burdens, among the most sought-after technique being donating to charities. However, regardless of your approach, documenting your income and expenses is the determinant of how you fair against the IRS. Tax matters can overwhelm you, especially if you are not tax-savvy. In such instances, professional tax consultations come in handy, sparing you from the pain of penalties that digs deep in your pockets. Make your Apple card rewards worth every penny by being sure how they affect your tax.