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| "FU^%ING" Credit-Cards!!! |
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| DrG:
--- Quote from: SilverSolder on June 29, 2020, 10:54:26 pm --- --- Quote from: Rick Law on June 29, 2020, 09:47:58 pm --- --- Quote from: DrG on June 29, 2020, 06:27:57 pm ---... ... BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?. --- End quote --- Good point - yeah, in the USA, that would not be entirely "free". You are getting money that you paid a tax on already. In the USA, that would depend on what State you reside and what you buy. - Every State has the own State sales tax rate that you must pay. - In some locales, you have to pay both State and Local tax with your purchases. - In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line. - Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example) Take New York City for example (State 4%, City 4.875%). So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back. On the other hand, discount is always applied before sales tax. So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay. Duty free shopping, anyone? Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping. But if you are not flying, you may still be able to do it! In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item). A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly. I don't mind paying tax if the money is put to good use. But you can count on government waste like you can count on the earth spinning. It will happen at least for another few million years. --- End quote --- Hmmm it is an interesting question. Let's say you buy something in a state that has 6% sales tax that cost $100, so the total charge to your credit card is $106. You will "get back" 1% of that $106 on your next statement. But the state received the full tax owed, and the store received the full $100. So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense! So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you. Awesome, right? Printing money right in front of us! --- End quote --- The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example. The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate. That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/ US and IRS only of course. |
| SilverSolder:
--- Quote from: DrG on June 29, 2020, 11:39:57 pm --- --- Quote from: SilverSolder on June 29, 2020, 10:54:26 pm --- --- Quote from: Rick Law on June 29, 2020, 09:47:58 pm --- --- Quote from: DrG on June 29, 2020, 06:27:57 pm ---... ... BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?. --- End quote --- Good point - yeah, in the USA, that would not be entirely "free". You are getting money that you paid a tax on already. In the USA, that would depend on what State you reside and what you buy. - Every State has the own State sales tax rate that you must pay. - In some locales, you have to pay both State and Local tax with your purchases. - In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line. - Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example) Take New York City for example (State 4%, City 4.875%). So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back. On the other hand, discount is always applied before sales tax. So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay. Duty free shopping, anyone? Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping. But if you are not flying, you may still be able to do it! In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item). A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly. I don't mind paying tax if the money is put to good use. But you can count on government waste like you can count on the earth spinning. It will happen at least for another few million years. --- End quote --- Hmmm it is an interesting question. Let's say you buy something in a state that has 6% sales tax that cost $100, so the total charge to your credit card is $106. You will "get back" 1% of that $106 on your next statement. But the state received the full tax owed, and the store received the full $100. So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense! So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you. Awesome, right? Printing money right in front of us! --- End quote --- The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example. The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate. That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/ US and IRS only of course. --- End quote --- But the state received their full 6% of the $100 in this example... by rights, they should only have taxed $99, not $100, if it really was a discount... The IRS probably chose to ignore this small error (1% of 6%, or 0.06%) |
| DrG:
--- Quote from: SilverSolder on June 29, 2020, 11:51:07 pm --- --- Quote from: DrG on June 29, 2020, 11:39:57 pm --- --- Quote from: SilverSolder on June 29, 2020, 10:54:26 pm --- --- Quote from: Rick Law on June 29, 2020, 09:47:58 pm --- --- Quote from: DrG on June 29, 2020, 06:27:57 pm ---... ... BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?. --- End quote --- Good point - yeah, in the USA, that would not be entirely "free". You are getting money that you paid a tax on already. In the USA, that would depend on what State you reside and what you buy. - Every State has the own State sales tax rate that you must pay. - In some locales, you have to pay both State and Local tax with your purchases. - In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line. - Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example) Take New York City for example (State 4%, City 4.875%). So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back. On the other hand, discount is always applied before sales tax. So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay. Duty free shopping, anyone? Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping. But if you are not flying, you may still be able to do it! In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item). A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly. I don't mind paying tax if the money is put to good use. But you can count on government waste like you can count on the earth spinning. It will happen at least for another few million years. --- End quote --- Hmmm it is an interesting question. Let's say you buy something in a state that has 6% sales tax that cost $100, so the total charge to your credit card is $106. You will "get back" 1% of that $106 on your next statement. But the state received the full tax owed, and the store received the full $100. So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense! So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you. Awesome, right? Printing money right in front of us! --- End quote --- The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example. The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate. That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/ US and IRS only of course. --- End quote --- But the state received their full 6% of the $100 in this example... by rights, they should only have taxed $99, not $100, if it really was a discount... The IRS probably chose to ignore this small error (1% of 6%, or 0.06%) --- End quote --- I don't think they (the IRS) cares much how the CC describes the rebate, they are just saying that they gave you a discount and they gave it to you as a rebate, so long as they didn't give you more than you spent. IOW, if you didn't pay any sales tax at all, for some reason, they still are not going to make you pay Federal tax on the discount and in turn the State is not going to make you pay State income tax, on the rebate that you got. Of course, the State may make the merchandiser charge a sales tax, or simply charge them the sales tax. As I remember, in the early days of Amazon, it was rare to be charged sales tax if you were not in the state and that got changed or they buckled down on it or something - somewhere in this thread, someone mentioned that. Edit: actually as I am re-reading what you are saying, it seems that the difference is like @Rick Law said - "On the other hand, discount is always applied before sales tax." So if I have a coupon for a bottle of soda for $1, regular price $2, I pay $1 + the 6% sales tax. In the case of the rebate maybe it does not work that way - is the CC giving you 1% of the total amount that you spent or 1% of the total amount NOT including the sales tax? |
| SilverSolder:
--- Quote from: DrG on June 30, 2020, 12:06:06 am --- --- Quote from: SilverSolder on June 29, 2020, 11:51:07 pm --- --- Quote from: DrG on June 29, 2020, 11:39:57 pm --- --- Quote from: SilverSolder on June 29, 2020, 10:54:26 pm --- --- Quote from: Rick Law on June 29, 2020, 09:47:58 pm --- --- Quote from: DrG on June 29, 2020, 06:27:57 pm ---... ... BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?. --- End quote --- Good point - yeah, in the USA, that would not be entirely "free". You are getting money that you paid a tax on already. In the USA, that would depend on what State you reside and what you buy. - Every State has the own State sales tax rate that you must pay. - In some locales, you have to pay both State and Local tax with your purchases. - In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line. - Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example) Take New York City for example (State 4%, City 4.875%). So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back. On the other hand, discount is always applied before sales tax. So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay. Duty free shopping, anyone? Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping. But if you are not flying, you may still be able to do it! In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item). A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly. I don't mind paying tax if the money is put to good use. But you can count on government waste like you can count on the earth spinning. It will happen at least for another few million years. --- End quote --- Hmmm it is an interesting question. Let's say you buy something in a state that has 6% sales tax that cost $100, so the total charge to your credit card is $106. You will "get back" 1% of that $106 on your next statement. But the state received the full tax owed, and the store received the full $100. So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense! So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you. Awesome, right? Printing money right in front of us! --- End quote --- The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example. The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate. That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/ US and IRS only of course. --- End quote --- But the state received their full 6% of the $100 in this example... by rights, they should only have taxed $99, not $100, if it really was a discount... The IRS probably chose to ignore this small error (1% of 6%, or 0.06%) --- End quote --- I don't think they (the IRS) cares much how the CC describes the rebate, they are just saying that they gave you a discount and they gave it to you as a rebate, so long as they didn't give you more than you spent. IOW, if you didn't pay any sales tax at all, for some reason, they still are not going to make you pay Federal tax on the discount and in turn the State is not going to make you pay State income tax, on the rebate that you got. Of course, the State may make the merchandiser charge a sales tax, or simply charge them the sales tax. As I remember, in the early days of Amazon, it was rare to be charged sales tax if you were not in the state and that got changed or they buckled down on it or something - somewhere in this thread, someone mentioned that. Edit: actually as I am re-reading what you are saying, it seems that the difference is like @Rick Law said - "On the other hand, discount is always applied before sales tax." So if I have a coupon for a bottle of soda for $1, regular price $2, I pay $1 + the 6% sales tax. In the case of the rebate maybe it does not work that way - is the CC giving you 1% of the total amount that you spent or 1% of the total amount NOT including the sales tax? --- End quote --- The total amount you spent. So there is an issue (small!) with the maths here. |
| DrG:
--- Quote from: SilverSolder on June 30, 2020, 12:17:22 am --- --- Quote from: DrG on June 30, 2020, 12:06:06 am --- --- Quote from: SilverSolder on June 29, 2020, 11:51:07 pm --- --- Quote from: DrG on June 29, 2020, 11:39:57 pm --- --- Quote from: SilverSolder on June 29, 2020, 10:54:26 pm --- --- Quote from: Rick Law on June 29, 2020, 09:47:58 pm --- --- Quote from: DrG on June 29, 2020, 06:27:57 pm ---... ... BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?. --- End quote --- Good point - yeah, in the USA, that would not be entirely "free". You are getting money that you paid a tax on already. In the USA, that would depend on what State you reside and what you buy. - Every State has the own State sales tax rate that you must pay. - In some locales, you have to pay both State and Local tax with your purchases. - In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line. - Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example) Take New York City for example (State 4%, City 4.875%). So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back. On the other hand, discount is always applied before sales tax. So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay. Duty free shopping, anyone? Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping. But if you are not flying, you may still be able to do it! In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item). A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly. I don't mind paying tax if the money is put to good use. But you can count on government waste like you can count on the earth spinning. It will happen at least for another few million years. --- End quote --- Hmmm it is an interesting question. Let's say you buy something in a state that has 6% sales tax that cost $100, so the total charge to your credit card is $106. You will "get back" 1% of that $106 on your next statement. But the state received the full tax owed, and the store received the full $100. So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense! So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you. Awesome, right? Printing money right in front of us! --- End quote --- The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example. The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate. That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/ US and IRS only of course. --- End quote --- But the state received their full 6% of the $100 in this example... by rights, they should only have taxed $99, not $100, if it really was a discount... The IRS probably chose to ignore this small error (1% of 6%, or 0.06%) --- End quote --- I don't think they (the IRS) cares much how the CC describes the rebate, they are just saying that they gave you a discount and they gave it to you as a rebate, so long as they didn't give you more than you spent. IOW, if you didn't pay any sales tax at all, for some reason, they still are not going to make you pay Federal tax on the discount and in turn the State is not going to make you pay State income tax, on the rebate that you got. Of course, the State may make the merchandiser charge a sales tax, or simply charge them the sales tax. As I remember, in the early days of Amazon, it was rare to be charged sales tax if you were not in the state and that got changed or they buckled down on it or something - somewhere in this thread, someone mentioned that. Edit: actually as I am re-reading what you are saying, it seems that the difference is like @Rick Law said - "On the other hand, discount is always applied before sales tax." So if I have a coupon for a bottle of soda for $1, regular price $2, I pay $1 + the 6% sales tax. In the case of the rebate maybe it does not work that way - is the CC giving you 1% of the total amount that you spent or 1% of the total amount NOT including the sales tax? --- End quote --- The total amount you spent. So there is an issue (small!) with the maths here. --- End quote --- If it is 1% of the total amount (which includes the sales tax) that you spent there is no problem for Income tax because that was taken on the $100 base and the $6 that went to for the sales tax. It is accurately described as a 1% rebate on the total amount that you spend. It may not be the same as a 1% discount, because that would mean that you pay $99 + sales tax on $99. But the CC card is not describing it as a 1% discount. Not sure where the issue is, but I think I understand what you are saying. Maybe the way the IRS describes it as a discount is a little odd? |
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