Cash Back Shopping

Today TaxMama hears from Janet in the Tax Quips Forum with an excellent question. “There are several websites out there that allow you to earn cash back when you shop on their site. Do you have to report these earnings to the IRS, considering it’s not really earned income?

you’re just getting a small rebate from the retailer when buying their product. I want to sign my grand kids up with cash back shopping so they can start saving for college. Will they be tax exempt from any money they earn when people shop for them?” 

Dear Janet,

I am So glad that you asked.  

That IS tax-free money to your and/or your grandchildren.  Two excellent sites that help you save for college are and . Another site that gives you money back is . Also look for credit cards that provide rebates that are deposited into a college savings plan. 

No need to go out of your way to spend. But if you’re buying things anyway, see if you can get a good deal using these sites. AND if you use college savings credit card to make the purchase, you could double your rewards.

 People who use the cards in their businesses can really rack up reward points for mileage, etc.  My sister-in-law ran a retirement hotel for about 20 years. Putting everything on credit cards, she built up enough mileage points that she is regularly able to travel to New York, Israel, anywhere, for free, or practically for free. (Of course, she paid off all the balances due the minute the bills were presented – not a favorite behavior of credit card companies.)

 For more tips about maximizing credit card rewards, visit Tim Winship at

Hey, who knows. Perhaps if you run your entire spending through those cards for the next dozen years or so, you might pay for a year or two of college.

  Couldn’t hurt.

 And remember, you can find answers to all kinds of questions about credit card and shopping rewards and other tax issues, free.
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