A bank bonus is not a gift. The IRS treats it as income, the bank reports it, and the tax is due for the year the money lands — not the year you spend it.
How it is reported
Banks generally report account-opening bonuses on Form 1099-INT, as interest income, when the total interest and bonus paid to you reaches the reporting threshold for the year. Some institutions use Form 1099-MISC instead, particularly where the reward was tied to something other than depositing funds.
Either way the amount is ordinary income, taxed at your marginal rate. There is no special lower rate, and no capital gains treatment.
You owe the tax whether or not a form arrives
This surprises people. Reporting thresholds decide when the bank must send you a form; they do not decide whether the income is taxable. A bonus below the threshold is still reportable income on your return.
Equally, if a form does arrive, the IRS has a copy. A 1099 that goes unreported is one of the easiest mismatches for automated checks to find.
Working out what you actually keep
The arithmetic is simple and worth doing before you apply:
- Take the headline bonus.
- Subtract any monthly maintenance fees you will pay before the waiver conditions are met.
- Subtract tax at your marginal rate.
- Subtract the interest you gave up by parking the qualifying balance in a low-rate account.
On a large qualifying balance held for 90 days, that last line is not trivial. A bonus can lose a meaningful share of its value to a combination of tax and forgone yield, which is why a smaller bonus with a shorter holding period sometimes beats a larger one.
Multiple bonuses in one year
Each bank reports separately, so opening several accounts across the year produces several forms. They stack on your return as ordinary income, and enough of them can nudge you toward a higher bracket or affect income-tested thresholds. Keep a simple record of every bonus received and the date it posted.
Referral bonuses are treated differently
A bonus you receive for referring someone else is frequently reported on 1099-MISC rather than 1099-INT. The tax outcome is usually the same — ordinary income — but the form differs, and referral income is more likely to be reported even at small amounts.
Interest earned on the balance is separate
If the account also pays interest, that interest is reported alongside the bonus on the same 1099-INT. Do not double count it, and do not assume the figure on the form is only the bonus.
Practical record keeping
Note the bank, the account type, the bonus amount and the date it posted. When forms arrive in January and February, reconcile them against that list. A missing form does not remove the obligation, and a form showing more than you expected usually means interest was included.
This is general information, not tax advice; your circumstances decide the treatment. Our bank bonus tax guide goes into more detail, and the current bonus roundup lists the offers themselves.