Are Credit Card Rewards Taxable?

With tax season approaching later this month, so too does a question that pops up frequently in Miles & Points circles: are frequent flyer miles and credit card reward points subject to tax, and do you need to claim the value of your points as income on your tax return?

There isn’t too much official guidance on this matter from the CRA, so in this article I’ll simply summarize the tax implications of credit card rewards in Canada as I personally understand it, with the disclaimer that this should be treated as a general overview rather than any kind of professional advice.

Personal Credit Card Rewards: (Mostly) No Tax Implication 

Things are pretty clear-cut when you’re simply earning and redeeming points as an individual with no association with any business activities. 

The CRA generally treats credit card rewards points as a discount or a rebate on purchases rather than income, and therefore does not see them as a taxable benefit. For example, when you pay for goods and services using a rewards-earning credit card, the 1 or 2 points per dollar spent represent a discount on the cost of those purchases. 

Similarly, when you sign up for a new credit card with a signup bonus in some form of rewards currency, those points are treated as a discount on the purchases that you must make in order to unlock that bonus.

So the case of, say, the American Express Business Platinum Card, the 75,000 Membership Rewards points are essentially a discount on the $7,000 that you must spend in the first three months to unlock that bonus.

A card like the WestJet RBC World Elite grants you the signup bonus (of 350 WestJet Dollars if you apply before March 31) as soon as you make the first purchase. In this case, if you buy a pack of gum as your first purchase, you’re getting a pretty hefty discount of well over 100%, but still a discount nonetheless.

Technically, if a credit card grants a signup bonus upon approval (i.e., it doesn’t require a purchase of any kind to unlock the bonus), such as the current record-high offer on the RBC Avion, then in theory the signup bonus can’t be treated as a rebate on spending.

However, the CRA hasn’t exactly set a precedent in this case, so I wouldn’t exactly feel pressured to declare these types of signup bonuses as income on your tax return, as the CRA seems happy enough to treat credit card signup bonuses that are earned by individuals as non-taxable across the board. 

One question that might arise here is whether any of this changes if you’re earning rewards points (through spending or signup bonuses) on business credit cards. While the discussion is definitely more nuanced for actual small businesses (as we’ll see below), my feeling is that individuals who are applying for small business credit cards purely for the points alone remain subject to the conventions that apply to individuals, and not small businesses.

After all, if you don’t have a small business in the traditional sense but are getting small business credit cards for the points, then the majority of your purchases on these cards will still be for personal spending (the fact that business credit cards are geared towards business spending is more of a general practice that’s encouraged by the issuers rather than a hard-and-fast rule).

As such, the conventions that apply to individuals – namely, the fact that credit card points are treated as a discount rather than a rebate – should still apply.

One further layer of complication concerns referral bonuses, which can in theory be treated differently as signup bonuses and points earned on regular spending. When you earn bonus points from referring a friend, you aren’t being rebated for any spending, but rather it’s definitely more similar to “income” in the sense that you’re being remunerated for completing a certain task. 

Note that in the US, American Express and Chase have started issuing IRS 1099 forms for referral bonuses, which essentially relate information to the IRS that you’ve earned a certain amount of referral bonuses in a given year. 

However, we’d hate to give the Canadian issuers any funny ideas here, so I’ll just mention that in Canada, the treatment of referral points as income is very much subject to your interpretation and should be self-reported if you do deem it as income as an upstanding citizen.

Finally, I should briefly touch upon the practice of manufactured spending (MS) – do points still get treated as discounts on regular purchases if those purchases, well, aren’t so regular at all? 

There’s an argument to be made that points earned from MS can veer into the territory of income rather than rebates, but again, there haven’t been any official guidance or rulings on these matters, so it remains subject to interpretation and it would be best to seek a professional opinion if you’ve been up to some heavy MS in 2019.

Business Credit Card Rewards: Slightly More Complicated

The situation gets a little more murky for those of you who operate small businesses, or who earn rewards points as part of your work (for example, by crediting flights that you take for a business trip into your frequent flyer account, or by making business purchases on your personal credit card that then get reimbursed by your employer).

If you earn rewards points on a personal basis as a result of your work, you’re only obligated to declare the value of these points as part of your income if one of the following scenarios apply:

  • You convert the points into cash. If you earn frequent flyer miles from business travel and redeem them for personal travel through the loyalty program, there’s no tax impact here (and in fact, a large proportion of frequent flyer program members are people who do exactly this).
    If you take the credit card rewards you earn as a result of your reimbursable business purchases and redeem them for a toaster, there’s also no impact, since you’re redeeming the loyalty points in their original form. Even statement credits or cash back still count as a direct redemption of loyalty points, as long as it’s one of the redemption options offered by the program.
    It’s only if you were to convert the points into cash – for example, by using the refundable hotel trick to get a credit balance on your credit card, and then requesting a cheque for that outstanding balance – that these points will now count as additional income.


  • Your employer gives you points as an alternative form of remuneration. If your employer simply pays you in points (perhaps, say, by sending 100,000 points from the company’s MR account to your Aeroplan account as an end-of-year bonus), then the value of those points will still need to be reported as income.
    Any attempts to skirt this rule, for example by frivolously letting you use your personal credit card for business expenses and then reimbursing you after the fact, would still result in the points being taxable, because of the third and final provision…


  • You and your employer enter into an arrangement regarding loyalty points that represents a form of tax avoidance. This is essentially a catch-all rule that allows the CRA to discourage employers and employees from skirting the above rules and to collect tax on any reward points that it feels ought to be taxable.


Remember, the above only applies in the context of a business: if you decide to cash out the points that you’ve earned as an individual, there’s no real need to worry about a tax burden. 

However, if you do travel frequently for work, you should take care to only redeem those miles in their original form; any attempt to convert them into cash would, according to the CRA’s guidance, incur a tax liability as a result. 

Furthermore, there are some implications that small business owners would need to be aware of. For example, if you earn large volumes of points every month through your business spending, you’re technically only supposed to redeem those points for business trips; if you were to treat yourself and your family to a leisure getaway at the beach, you’ve technically redeemed the business’s points for personal use as an employee and therefore created a taxable benefit by virtue of receiving an alternate form of remuneration.

Of course, all of this needs to be self-reported, and many business owners out there frequently do exactly that without necessarily reporting the taxable benefit, so it’ll be up to every individual to determine the best course of action.


Indeed, beyond the above guidance, the CRA hasn’t really commented further on other nuances relating to earning and redeeming credit card rewards in the context of a business, so professional advice will likely be warranted if you have any uncertainties in this regard.

One of the questions that I face, for example, as someone who runs a Miles & Points website, is whether the points I earn and the trips I redeem for are personal or business in nature.

In the absence of a “Guidance for Miles & Points Website Owners” page on the CRA website, then, I work with my accountant to exercise our best judgment and ensure that any decisions we make are supported by adequate reason and careful records, and I’d advise that you do the same for your business as well. 


The CRA has issued limited guidance on the tax treatment of credit card rewards, and we’ve largely been left to use our best judgment when preparing our tax return. 

For individuals who earn and redeem points on a personal basis, there is very little need to worry about a tax burden arising from your credit card points, as they’ve largely been treated as a discount or rebate rather than income (at least in Canada – it would definitely be an annoyance if the US-style IRS 1099 forms for referral bonuses were to show up here as well). 

Business owners, as well as individuals who earn points through activities undertaken on behalf of their work, should take a little more care that they aren’t creating a taxable benefit in how they use their points, but overall there shouldn’t be an issue as long as you aren’t converting the points to cash or receiving points as an alternate form of remuneration.

As I mentioned, the above is only my personal understanding of the matter, so if any accounting professionals would like to chip in with additional perspectives or correct me on anything I’ve gotten wrong, feel free to let me know in the comments. 

  1. sCheck

    Interesting post! What about cashback given from cashback cards, or bank account signup promotions?

    1. Ricky YVR

      Cash back falls into the same category as a discount or rebate, as I understand it.

      Meanwhile, I believe bank account bonuses should technically count as income (since it’s not really a discount of any kind), so everyone who got in on the Coast Capital $500 last year should technically be declaring it. However, I’m not aware of any Canadian bank that has issued the equivalent of 1099 forms for the account opening bonuses, so it’s up to every individual to declare.

  2. John

    Great summary. Note that there may be a distinction between a self employed business owner and someone incorporated.

    For a self employed person, there aren’t really “business cards” per se. As a matter of accounting simplicity it is preferable to keep separate cards, however the cra doesn’t care where spending goes. As a sole proprietor they’re all personal cards/bank accounts.

    However, when someone incorporates, then there is a real legal distinction between the corp and the corp owner, and there are thus more potential issues.

    1. junyanboon

      So you are saying that as a sole proprietor, any points accumulated on any card could be used to personal trips?

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