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How Are Bank Promotions Taxed?
Posted By Jim On 03/10/2011 @ 7:30 am In Banking | 25 Comments
You may have seen an increase in the number of bank deals  listed on Bargaineering lately. The reason for the uptick has to do with the economy. As the economy recovers and banks start offering more incentives and promotions to attract new customers, the number and size of these bonuses has been increasing. Two years ago, the bank offers were paltry, if not extinct. If you got more than a toaster out of a new account, you were doing well.
With the return of $100 and $150 cash offers for new accounts, you might be wondering whether or not you have to pay tax on the promotions.
Unfortunately, unlike credit card rewards, you will have to pay taxes on bank bonuses. Most banks warn that they will be issuing a 1099-INT for the value of the bonus. If the bonus is a product, they will issue a 1099-INT for the retail value of the bonuses. This note is normally included in the fine print terms & conditions of the promotional offer. How much tax you pay will depend on your income tax rate  because 1099-INT is treated as bank interest.
If you plan on taking advantage of several promotions, be sure to put aside some of that bonus money to help pay for taxes. Banks don’t withhold taxes like employers do.
What’s the best bank promotion you’ve gotten?
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