QUESTION:
Are cash or point rewards I earn from my credit card taxable?
ANSWER:
The general rule is no, because the IRS reviews these as discounts on purchases you make. This is true whether you receive cashback, statement credits or airline miles.
There are exceptions. For example, if you receive a cash or points bonus simply by opening an account, it’s taxable if there are no spending requirements attached.
Keep in mind that these rules also apply to bank accounts. If your bank gives you $500 for opening a savings account but doesn’t attach any spending requirements, generally this will be considered taxable income.
QUESTION:
My business needs to buy some new machinery. Which is better for taxes – leasing or purchasing?
ANSWER:
When you lease equipment for your business, generally you can deduct the lease payments as rent. But you’ll need to make sure the lease isn’t a disguised installment or conditional sale agreement, which would mean accounting for it as a purchase.
Purchasing equipment generally means you’ll recover the cost through annual depreciation. This spreads the cost across the equipment’s useful life. But now, through December 31, 2022, purchasing certain equipment will allow you to write off the entire cost in the year you start using the equipment.