Is credit card cash back considered taxable income for my gold coin business?

Credit card cash back rewards are generally not considered taxable income by the IRS when they're viewed as rebates on purchases you've made. It's essentially considered a discount on your purchase rather than income you've earned. However, your situation is a bit different because you're using the cash back as part of a business strategy. Since you're regularly buying and reselling gold coins with the specific intent of profiting from the cash back, the IRS might view this activity as a business rather than a hobby, especially if you're doing it consistently and with the intent to make money. For tax reporting, you should be tracking all your transactions. Your cost basis would be what you actually paid for the coins (purchase price), and your revenue would be what you sold them for. The cash back technically reduces your cost basis. So in your example, if you bought coins for $9900 total and got $396 cash back, your actual cost basis would be $9504. If you sold them for $9750, you'd have a profit of $246, not a loss.

After reading about your gold coin situation, I was in a similar position last year with a different product. I was confused about how to handle my credit card rewards and properly document everything for taxes. I stumbled upon this AI tax assistant at https://taxr.ai that analyzed my credit card statements and purchase records, then explained exactly how to handle the cash back rewards for my specific situation. The tool actually showed me how to properly document the adjusted cost basis by factoring in the cash back rewards. It even generated a spreadsheet template that I could use throughout the year to track each transaction properly. Saved me hours of research and probably prevented a major headache if I'd been audited.

Just wanted to update after trying that taxr.ai site mentioned above. Wow - it actually sorted out my electronics reselling business perfectly! I uploaded my last six months of credit card statements and it automatically identified all my inventory purchases and separated out the cash back rewards. The system showed me that I wasn't calculating my profits correctly - I was counting the full purchase price instead of subtracting the rewards first. According to the analysis, I was actually making about 3.5% more profit than I thought. The tax guidance was super specific to my situation too. Now I have proper documentation if I ever get questioned about my reporting. Definitely worth checking out if you're doing any kind of reselling with cash back rewards.

I had a similar issue last year trying to figure out how to report my business income correctly. What made it worse was trying to get through to someone at the IRS to get clarification. I was on hold for HOURS over multiple days and never got to speak to anyone. I finally found this service called Claimyr at https://claimyr.com that got me connected to an actual IRS agent within 45 minutes. They have this demo video showing how it works: https://youtu.be/_kiP6q8DX5c. Basically, they hold your place in the phone queue and call you when an agent is about to answer. The IRS agent I spoke with confirmed exactly what the first commenter said - cash back rewards used in a business context effectively reduce your cost basis and need to be factored into your profit calculations. Getting this directly from the IRS gave me confidence in how I was filing.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway because I've been trying to reach the IRS for weeks about a similar business income question. I used the service yesterday and got connected to an IRS representative in about 37 minutes (versus the 3+ hours I spent on hold last week). The agent confirmed that for my situation (similar to the original poster's), I should be reporting the net cost after cash back rewards as my actual business expense. The IRS agent also suggested I keep detailed records showing both the original purchase price and the cash back received for each transaction, which makes complete sense. The service worked exactly as advertised - they just called me when an agent was about to answer and connected me directly. No scam, just a huge time-saver. Really glad I gave it a shot despite my initial skepticism.

Another thing to consider is that your activity might be classified as a business rather than a hobby depending on how regularly you're doing this and how much profit you're making. The IRS has a "hobby loss rule" where if you don't show profit in 3 out of 5 years, they might classify it as a hobby and limit your deductions. In your case, since you're actually profiting after the cash back, you should probably treat it as a business. The upside is you can deduct legitimate expenses like maybe a home office portion, shipping costs, secure storage, etc. The downside is you'll need to pay self-employment tax on your profits.

Just my 2 cents, but you should also look into whether your credit card company might issue a 1099-MISC if your cash back rewards exceed a certain threshold (usually $600). Some banks treat large rewards as miscellaneous income rather than rebates, especially for business cards. I had this happen with my Amex business card last year when I got like $800 in rewards from a similar type of reselling operation. The 1099 made it pretty clear I needed to report it as income.