This is Why You Still Have to Pay Taxes on Gift Cards from Survey Sites
Paid survey sites can be a simple way to bank a little cash in your free time.
You probably know surveys aren’t our favorite way to make extra money, but we make an exception for when you’re just hanging out — e.g. watching T.V., riding the train, in the back of an Uber. Might as well click a few buttons and make some money while you’re at it.
InboxDollars is one of the rare legitimate paid survey companies out there.
These sites typically pay in points instead of direct cash, but you can use those points to purchase gift cards with actual cash value. Should you prefer cash over the cards, you can turn around and sell any gift cards you earn.
Which leads us to a common question…
Do Paid Surveys Count Toward Taxable Income?
Whatever you earn through survey sites — or any other apps you use to earn money — counts toward your gross income come tax time.
A reader recently wrote to ask us about this:
“Is there any way to make money or [earn] gift cards that isn’t going to have to be filed on our taxes as income? We are very close to the cutoff of paying full price for health care for our two children…”
Short answer: Not really.
Longer answer: Taxes are complicated, but let’s quickly break it down.
The IRS files all the money you receive into tons of different categories. It taxes most of them, including those you probably expect:
- Salary or wages
- Freelance income ← Where your app income probably fits in.
Here’s why: Yes, technically you’re receiving the income as a “gift card,” but it isn’t a gift, per se.
To the IRS, cash equivalent items look just like income, so you count them as part of your wages.
More Things That Count Come Tax Time
Because we know you like finding creative ways to make money, here are some taxable items you might not expect:
- Bartering: If you fix your neighbor’s chimney in exchange for their son mowing your lawn, the IRS wants to know the value of those lawn-mowing services.
- Gambling winnings: You have to report any money or prizes you win gambling. But you can deduct your losses. That’s one stroke of good luck!
- Hobby income: Do you make money from a blog or selling antiques? You have to report that. But you can also deduct expenses, like hosting or travel, up to the amount of your hobby income.
- Illegal activity: Did you earn money selling drugs or a stolen car this year? (Please don’t answer that.) The IRS wants to know about it. So do your local police.
- Canceled debts: Pay attention to this one. If you negotiate with a creditor about credit card debt or a hospital to reduce a medical bill, you’ll have to report it as income.
- Alimony: This counts as income in the eyes of the IRS. (Child support is different. Keep reading.)
What You Don’t Have to Count as Income for Tax Purposes
Back to that reader question… here are a few things you don’t have to report as taxable income:
- Olympic medals and prizes: Headed to the Olympics or Paralympics sometime soon? Thanks to a 2016 law under former President Obama, you won’t pay taxes on the spoils if you win.
- Child support: No taxes on child support you receive! The payer foots the tax bill on that money.
- Carpool money: If you drive in a carpool, any money you get from passengers is considered reimbursement for your expenses, not income. If you drive with a service like Uber or Lyft, however, you’ll pay taxes on that income as an independent contractor.
There are a few more untaxables, but they get pretty particular.
Bottom line: You’ll pay taxes on pretty much any money you bring in — including the stuff you get from survey sites and other apps.
If you want to keep your taxable income low, make sure you claim as many deductions as possible.
Dana Sitar ([email protected]) is a writer and editor at The Penny Hoarder. Say hi and tell her a good joke on Twitter @danasitar.
This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can't personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.