Microsoft ran a rather odd program where they would issue you a rebate of
25% for anything bought on "buy it now" ebay, and paid for with Paypall.I took full advanage of it and I (well, me, my wife and son) are getting about $1,000 in rebates.
Is it income, or simply a reduction in what I paid for the stuff.
The way this is treated is the same as a discount. When you deposit funds at a bank to get a free iPod, the value is part of income, as interest on the account would be. But as you suggest, this refund is just a cost reduction.
Joe
Rebates are not taxable income at the personal level. Did you use any or all part of the software for business?
The latter. See IRS Publication 525.
What about a situation where a pharmacy offers a $25 gift card if you transfer a prescription from another pharmacy. For example, I can transfer a prescription from another pharmacy that would normally cost, say, $10. I still have to pay the $10 to the new pharmacy, but the pharmacy then gives me a free $25 gift card to use on a future purchase. The question I have is can I still deduct the $10 cost of the prescription as a medical expense and do I have to report the $25 gift card as income?
"Rick" wrote
That sounds like income. This is based on the gift card being accepted off-site at a competitor store, for groceries, or beer.
I might think differently is it's an in-store card, as that would be a discount off future business with them. Just like those places where you buy 12 subs and get the 13th sub for free.
Your question makes me wonder if I was clear enough. No software was involved. I bought a saw, a lathe, and a jointer; none were Microsoft products (obviously). Anything on eBay was eligible (subject to a few contraints); so it was more like a gift than a reduction in price since MS didn't get any of my money.
Even if you consider this rebate as a GIFT, the nontaxability still applies. Gifts are not income.
A reduction, so long as the effective price doesn't drop below $0 (in which case the rest is income).
Seth
It reduces your basis.
When you deposit funds at a bank to get a free iPod, the value is part of income, as interest on the account would be.
Andy comments:
And, yet, the bank declares, in their advertising, that you are getting a "gift". A gift is taxable only to the giver...
But at the end of the year, they add their own determination of the value of the "gift" to your interest statement......
.... this often results in the tax due on the "gift" being greater than the cost of the item if the depositor had just gone out and bought it......
Back in the 80's, I ended up in paying more tax for a toaster than a new toaster would have cost me.... I cancelled my account with that bank.
Andy in Eureka, Texas
Civis Eurekus Sum
In this case, it's an in-store gift card that can only be used at the pharmacy (though oddly it can't be used on prescriptions)...
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