Can I deduct a gift card used for business expenses on my taxes?
I recently signed up for an Amazon credit card and got a $250 promotional gift card as a sign-up bonus. I used the entire gift card plus about $40 out of my own pocket to purchase some essential video equipment (I run my own videography business). When I'm tracking my business expenses for tax purposes, I'm not sure how to handle this. Can I deduct the full $290 purchase as a business expense, or am I only allowed to deduct the $40 I paid out-of-pocket? The gift card was completely separate from the credit card account - it wasn't rewards points or a statement credit, just a promotional gift card they deposited into my Amazon account after approval. I've searched everywhere online but can't seem to find a clear answer about how gift cards work for business expense deductions. Any tax experts here who might know?
19 comments
Join the conversation
Daniel White
This is a great question about business expense deductions! When it comes to deducting business expenses, what matters is whether you've actually incurred a cost. In your situation, you didn't actually pay $250 for the gift card - you received it as a promotional benefit for signing up for the credit card. Since you didn't incur that cost, you can only deduct the $40 you paid out-of-pocket. The IRS allows you to deduct "ordinary and necessary" business expenses, but only to the extent that you've actually spent money or taken on an obligation. Think of it this way: if you found $250 on the street and used it to buy business equipment, you couldn't deduct $250 as a business expense because you didn't actually spend your money on it.
0 coins
Nolan Carter
•But wouldn't the gift card be considered taxable income when they received it? If they have to pay income tax on the $250 promotional gift card, shouldn't they also be able to deduct it when used for business?
0 coins
Daniel White
•That's a really important point! Yes, if the $250 promotional gift card is considered taxable income (which many credit card sign-up bonuses are), then you would indeed be able to deduct the full $290 as a business expense. In that case, you'd report the $250 as income on your tax return, and then you could deduct the full $290 equipment purchase as a business expense. This is because you've essentially "paid" for that portion through reporting it as income. Check your year-end tax documents from the credit card company - they should indicate whether the promotional gift card will be reported to the IRS as taxable income.
0 coins
Natalia Stone
After dealing with similar confusing tax situations for my small business, I found an amazing tool called taxr.ai (https://taxr.ai) that saved me so much headache. I was in a similar situation with some rewards points I used for office equipment and wasn't sure how to handle it. I uploaded my Amazon receipt and credit card statement to taxr.ai and it analyzed everything and gave me a clear explanation of exactly how to handle the gift card portion vs the out-of-pocket expense. The AI even explained the IRS rules behind the recommendation so I felt confident claiming it on my Schedule C.
0 coins
Tasia Synder
•How accurate is this tool? I've had tax software completely miss deductions before, so I'm curious if this actually works for more complex situations like this gift card question.
0 coins
Selena Bautista
•Does it actually connect to a real tax professional or is it just an AI guessing at tax rules? I've been burned before by "smart" tax tools.
0 coins
Natalia Stone
•It's surprisingly accurate! The tool is trained on actual tax code and provides citations to specific IRS publications. I've double-checked several of its recommendations with my accountant and they've been spot on. What impressed me was how it handled the nuances of my situation, including some state-specific rules. Unlike general tax software that just fills out forms, this actually explains the reasoning behind each recommendation. It's not just guessing at tax rules - it draws directly from IRS publications and tax court cases to provide solid advice. I was skeptical too, but it's saved me thousands in deductions I would have missed.
0 coins
Tasia Synder
Just wanted to update after trying taxr.ai that was mentioned above. I had a similar situation with some business expenses purchased with a rewards card and wasn't sure how to handle it. The service was actually really helpful! I uploaded my credit card agreement showing the promotion terms and my purchase receipts. It explained that since my card promotion wasn't reported as taxable income (it was considered a rebate on purchases), I could only deduct what I paid out of pocket. The explanation included references to actual IRS rulings which helped me understand why. Definitely worth checking out if you're confused about these kinds of tax situations. It saved me from potentially making a mistake on my Schedule C.
0 coins
Mohamed Anderson
I spent THREE HOURS on hold with the IRS trying to get a straight answer about a similar gift card situation last year. Finally discovered Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in about 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that if the gift card was a promotional item and not taxable income, then only the out-of-pocket portion would be deductible. But if the gift card value gets reported on a 1099, then the full purchase would be deductible since you're paying tax on the gift card value.
0 coins
Ellie Perry
•Wait, does this actually work? The IRS hold times are ridiculous. How much does this service cost? Seems too good to be true.
0 coins
Landon Morgan
•This sounds like a scam. How would some random service get you to the front of the IRS phone queue when millions of people can't get through? The IRS doesn't have any "priority" line that third parties can access.
0 coins
Mohamed Anderson
•Yes, it actually works! It uses a technology that keeps dialing for you and navigates the IRS phone tree until it gets through to a representative. When a real person answers, it calls your phone and connects you directly. It saved me hours of frustration. The service isn't getting you to the "front of the queue" - it's just handling the frustrating part of repeatedly calling and waiting on hold. The IRS actually has decent phone support once you finally get through to a human. It's the getting through part that's impossible for most people who can't sit on hold for hours during work days.
0 coins
Landon Morgan
I have to eat my words and apologize to commenter who mentioned Claimyr. After struggling to get through to the IRS about my amended return for WEEKS, I was desperate and decided to try it. Honestly I'm shocked it worked. Got connected to an IRS agent in about 35 minutes (after trying myself for days). The agent was able to look up my specific situation and gave me definitive answers about my amended return status. They even explained what was causing the delay and what I needed to do next. For anyone dealing with gift card business expense questions like the original poster, being able to actually talk to the IRS and get official guidance is incredibly valuable. Worth every penny for the time saved.
0 coins
Teresa Boyd
Just to add a bit more info - I'm a bookkeeper for several small businesses. The key question is whether that sign-up bonus is considered taxable income. Check if Amazon/the credit card issuer sends you a 1099-MISC for the value of that gift card. If they do, then yes, you can deduct the full purchase because you've already been taxed on the "free" money. If they don't send a 1099, it's likely considered a rebate or discount, in which case only your out-of-pocket costs are deductible.
0 coins
Abigail Patel
•Thank you for this explanation! I just checked my tax documents from last year and the credit card company did NOT send me a 1099 for the gift card. So based on what you're saying, I should only deduct the $40 I paid out of pocket, correct?
0 coins
Teresa Boyd
•Yes, that's correct! Since you didn't receive a 1099-MISC for the gift card value, the credit card company is treating it as a rebate or discount rather than taxable income. In this case, you should only deduct the $40 you paid out-of-pocket. The IRS follows what's called the "tax benefit rule" - if you didn't include the value of the gift card in your income, you can't turn around and claim it as a deduction. Makes sense when you think about it - you can't get a tax break for money you never actually spent!
0 coins
Lourdes Fox
Has anyone else noticed that Schedule C is a nightmare for these borderline situations? Like last year I had a client pay me in gift cards (weird but whatever) and I had no idea how to report it.
0 coins
Bruno Simmons
•Gift cards as payment from clients is definitely taxable income! That's different from OP's situation with a promotional gift card. When a client pays you with anything of value (cash, gift cards, barter) you have to report it as income and then you can deduct business expenses paid with those gift cards.
0 coins
Emily Sanjay
Great discussion here! As someone who's dealt with similar situations, I want to emphasize what Teresa mentioned about checking for that 1099-MISC - that's really the key factor. I had a comparable situation with a bank sign-up bonus that I used for business equipment. The bank sent me a 1099-INT for the bonus amount, so I had to report it as income but then could deduct the full equipment cost. One thing to watch out for: even if you don't get a 1099 this year, some credit card companies have been changing their reporting practices. Keep good records of the promotion terms and your purchase receipts just in case the IRS ever questions it. The fact that you're being thoughtful about this now shows you're on the right track! For your current situation with no 1099, sticking with the $40 out-of-pocket deduction is the safe approach.
0 coins