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Capital One expands credit card benefits it deems taxable, surprises some customers with 1099s

Feb. 17, 2023
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4 min read
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Capital One expands credit card benefits it deems taxable, surprises some customers with 1099s
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Most people earn credit card rewards or use built-in statement credits on their credit cards to save money ... not rack up a bigger tax bill.

Unfortunately, it seems some Capital One cardholders are receiving unexpected 1099s for using some of their credit card perks — such as statement credits available for application fees on programs like Global Entry.

A U.S. Tax Court ruling from 2021 says that earning points or rebates from a credit card isn't considered income, so what's happening here? Why is Capital One sending out 1099 forms, which are typically used to report income for tax purposes?

Normally, there are some cases where you might receive a 1099 form for bank account sign-up bonuses, bonuses for referring a friend to a credit card or for buying cash equivalents like gift cards and money orders.

For example, TPG reader Kevin Banh got one for referrals he made to others. "I referred 2 for CapOne (50k miles) but didn't get any forms in 2022 for 2021. But referred 4 (100k miles) and got a form this year," Banh said. That's pretty standard since referral bonuses are considered income instead of a rebate on spending.

The same applies to opening a Bask Bank Mileage Savings Account to earn American Airlines AAdvantage miles. The rewards you'll earn are considered interest income. So, you'll receive a 1099 form as these are also not seen as rebates on spending, which are generally not taxable.

A Bask Bank 1099. BASK BANK

What we are seeing from Capital One now, however, is new territory.

Gary Leff at View from the Wing told the story of one of his readers who got a 1099 from Capital One for goodwill points, referral bonuses and statement credits — an unusual combination.

Capital One is now potentially treating statement credits and anniversary bonus points as gifts, which can be taxable and count toward annual reporting requirements. Traditionally, statement credits and bonus points have presumably been treated by the banks as rebates on spending (including spending the money for the card's annual fee) — which the IRS does not view as taxable income.

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A spokesperson for Capital One provided the following statement:



Required reportable payments include certain credits or gifts given to customers including the TSA Pre/Global Entry statement credit and courtesy credits via customer servicing; reportable payments must equal or exceed a total of $600 within a year for a customer to be eligible to receive the 1099-MISC form.

The silver lining here, if there is one, is that a 1099 is not sent by Capital One unless you've received $600 or more in the calendar year in the form of certain credits or gifts.

Additionally, the value of the welcome bonuses you earn by signing up for Capital One credit cards and points earned from everyday spending on the card do not fall into that category. So, most cardholders will likely fall below that $600 threshold. However, customers who earn points by referring friends and family and use these credits may be most at risk of going over that threshold.

If you have questions about a 1099, or believe that the value you received isn't the same as what is listed on your 1099, consult your tax preparer.

Related reading:

Featured image by MSTUDIOIMAGES/GETTY IMAGES
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Why We Chose It

There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)

Pros

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  • 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
  • Packed with credits foodies will enjoy
  • Solid welcome bonus

Cons

  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber and other dining credits
  • You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
  • Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
  • Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
  • Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
  • Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
  • Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
  • $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
  • $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
  • $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
  • Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
  • No Foreign Transaction Fees.
  • Annual Fee is $325.
  • Terms Apply.