I just read an article that says that cash rebates from businesses are not taxable.
The last couple years I have been moving money around brokerage accounts for significant cash incentives. (beats the heck out of me why they do it, but that's another issue) I assumed they are taxable and have listed them under miscellaneous income, but the article made me wonder if I was doing it right. Perhaps there is a difference between an incentive and a rebate; but I am asking. thanks
Cash rebates are treated as a discount to the price you paid. As such, it is not income. Credit card rewards work the same way: they are treated as a discount and are not taxable.
Yes, there is a difference. When a bank gives you an incentive to open an account, that payment is considered taxable interest. In the same vein, when a broker provides an incentive to open an investment account, that incentive is also taxable income.
An incentive to open a retirement account and paid into the retirement account is not taxable until you eventually withdraw it (unless it is a Roth type plan and is never taxable).
Ask IRS !!!
What if the incentive is only payable after at least 20 trades over a 3 month period?
If you receive money that cannot be considered a return of part of money you have paid, it's an incentive, not a rebate, and taxable. It doesn't matter what you do in exchange for it. If you have reasonable grounds to call it a retroactive reduction in price, then you may get away with not paying tax on it.
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