Money for opening up a checking/savings account

[kandb]

My husband and I have good credit. I am constantly getting offers mailed to open a new checking/savings account. I just opened a checking/savings account that gave me $200 bonus for the checking and $400 for the savings account for a total of $600. Obviously, I will have to pay tax on this money as it seems to be put with any interest I make on the accounts. When credit cards give you bonus points and then you turn them in for gift cards, does these items gets taxed? Just want to get the smartest offers

 

[gottalovepluto]

Credit cards don't ever issue 1099 and analysis I've read says those rewards aren't taxable. Bank bonuses are for sure taxable as 1099 INT. They are a part of your income for the year in you receive the bonus. Keep track yourself of bank bonuses! You're responsible even if the bank fails to issue a 1099 from what I've read. Some people got burned from HSBC screwing up their 1099s last year & are having to refile their taxes.

 

[kandb]

Thank you for the info. I really appreciate it.

 

[Buzzsgramma]

Don't most of those offer require you to do at least one direct deposit ??

 

[kandb]

Don't most of those offer require you to do at least one direct deposit ??

Yes, I had to open a checking and a savings account with $5K each. You had to make 2 direct deposits within 90 days, which I did with my paychecks from work. I got a total of $600 bonus money, good deal but probably half will go to Uncle Sam!!!!!

 

[Albort]

Don't most of those offer require you to do at least one direct deposit ??

there are some transfers from certain bank that will trigger it.

 

[gottalovepluto]

Don't most of those offer require you to do at least one direct deposit ??

Yes. Once in a while deposits from other banks will trigger the bonus, but it's rare. Usually you need to direct deposit deposit a paycheck, tax refund, government benefit, etc.

 

[supersnoop]

but probably half will go to Uncle Sam!!!!!

The highest marginal tax rate, at least in the U.S., is 39%. Depending on your income, it's likely that less than a third will go to "Uncle Sam."

 

[Moramoon]

We did an offer with Huntington last year for $200 to open a checking account with 3 direct deposits. It lowered our tax refund about $30, but still well worth it. We did receive a 1099 INT for it.

 

[Mackenzie Click-Mickelson]

The highest marginal tax rate, at least in the U.S., is 39%. Depending on your income, it's likely that less than a third will go to "Uncle Sam."

Well when I would get bonuses from my job around 40% would be taken out for taxes (bonuses were each year and called STIP or short term incentive plan). Those bonuses and the tax rate weren't dependent on income whatsoever. You had the choice of taxing in cash (and getting the ouch tax rate), deferring completely to 401k or deferring a portion to 401k and taking the rest in cash. So I guess tax rate would depend on what type the bonus falls under.

 

[Pkltm]

We are opening one this week that gets us a free Apple Watch.

 

[amcnj]

The way I understand it is you will end up paying whatever your marginal tax rate is on any bonuses. If it is a work bonus, there may be requirements as to a percentage they must withhold. But you then will just claim the bonus as income and any amount withheld as a credit against any taxes due, and the end result will be paying tax on that bonus at your marginal rate. The marginal rate is the rate you pay on the last few dollars of income. Now of course a bonus could put you over into a new tax bracket and thus be at a higher rate than your normal marginal rate. Consult the tax tables for a more precise picture of the impact.

 

[supersnoop]

Well when I would get bonuses from my job around 40% would be taken out for taxes (bonuses were each year and called STIP or short term incentive plan). Those bonuses and the tax rate weren't dependent on income whatsoever. You had the choice of taxing in cash (and getting the ouch tax rate), deferring completely to 401k or deferring a portion to 401k and taking the rest in cash. So I guess tax rate would depend on what type the bonus falls under.

The tax rate, the taxes you owe, and the withholding rate are all different things. The withholding rate is just a guess anyway. The bank isn't withholding anything on these bonuses, so that's irrelevant. Since these bonuses are just that (bonuses), most people would recognize the taxes owed at their highest marginal tax rate. Unless you're bribing in over $400,000, then you'll be on the hook for 28%-35%.

 

[snarlingcoyote]

The way I understand it is you will end up paying whatever your marginal tax rate is on any bonuses. If it is a work bonus, there may be requirements as to a percentage they must withhold. But you then will just claim the bonus as income and any amount withheld as a credit against any taxes due, and the end result will be paying tax on that bonus at your marginal rate. The marginal rate is the rate you pay on the last few dollars of income. Now of course a bonus could put you over into a new tax bracket and thus be at a higher rate than your normal marginal rate. Consult the tax tables for a more precise picture of the impact.

<Raises Hand>

Had that happen. Now I keep a close eye in Q4 of each year on what our taxes will look like the next year. Sometimes our 401K benefits from it!

 

[Mackenzie Click-Mickelson]

The tax rate, the taxes you owe, and the withholding rate are all different things. The withholding rate is just a guess anyway. The bank isn't withholding anything on these bonuses, so that's irrelevant. Since these bonuses are just that (bonuses), most people would recognize the taxes owed at their highest marginal tax rate. Unless you're bribing in over $400,000, then you'll be on the hook for 28%-35%.

Ok. Thanks for clarification on that.

 

[gottalovepluto]

...Unless you're bribing in over $400,000...

In which case you probably aren't reporting to the IRS anyway

 

[mjonis]

The way I understand it is you will end up paying whatever your marginal tax rate is on any bonuses. If it is a work bonus, there may be requirements as to a percentage they must withhold. But you then will just claim the bonus as income and any amount withheld as a credit against any taxes due, and the end result will be paying tax on that bonus at your marginal rate. The marginal rate is the rate you pay on the last few dollars of income. Now of course a bonus could put you over into a new tax bracket and thus be at a higher rate than your normal marginal rate. Consult the tax tables for a more precise picture of the impact.

There's the "bonus" you get from these new checking accounts, which is actually taxable as interest income (1099), not earned income. (read the fine print on the bank promo like Discover, etc. and you'll see this).

Then there's bonuses at work (earned income reportable on W2). The IRS allows for 2 methods to calculate taxes/witholding on those bonuses. One is the "easy" way which is actually a flat rate method, that seems to work out around 40% (depends on which state you live in). Here, in NY, it's calculated at 9.62% state witholding (ironically, our highest witholding rate normally reserved for millionaires), and 25% Federal.

The alternative (aggregate) method is more accurate (IMO), but a lot of employers don't like to mess with that as it's more time-consuming. The theory is that so what if they withold 40% using the flat rate method, as you'll whatever difference back as a refund when you file. Personally I don't like giving the Fed/State government interest free loans.

But even if you have to pay taxes on the 1099 from the bonuses, it's still "free" money. I got like $550 bonuses 2 years ago from Key Bank, got another $300 from Discover last year, and am getting another $300 from Bank of America this year. It is a slight PITA to keep switching the direct deposit around, but it's $300 I didn't have before. That'll pay for my rental car in Hawaii for my next trip. LOL!

 

[ruadisneyfan2]

Yes. Once in a while deposits from other banks will trigger the bonus, but it's rare. Usually you need to direct deposit deposit a paycheck, tax refund, government benefit, etc.

Actually, I have found that it's quite the opposite. MOST bank transfers trigger the bonus.
We have done a lot of these lately, $1200 last year and $1900 so far this year. It's rare that an ACH transfer doesn't trigger the bonus and of course, there are people who keep tabs on all this stuff. At least this has been our experience with pushing transfers from Capital One 360.

http://www.doctorofcredit.com/best-bank-account-bonuses/