Taxation of Incentives Received from a Bank

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You open a savings account at a bank and they give you a toaster or a cooler or a coffee cup as a gift. Is this taxable?

It depends on the value of the gift and the amount of the initial deposit into the account.


Here are the rules:

  • If the initial deposit is less than $5,000 and the value of the gift is less than $10, the gift is not taxable.
  • If the initial deposit is $5,000 or more and the value of the gift is less than $20, the gift is not taxable.

If a gift is taxable, it is considered interest income and is reported along with other interest income from the bank on a Form 1099-INT*.


You open a new savings account with an initial deposit of $100 into the account. The bank gives you a $20 toaster as a prize. Because the initial deposit was less than $5,000 and the gift was worth more than $10, the toaster is taxable to you. At the end of the year, the bank will send you a Form 1099-INT*, reporting the $20 gift plus any other interest you earned on the account.

Determining the Value of the Gift

The value of the gift is based on the cost to the bank of acquiring the gift. So if the bank spends $10 on a coffee cup and they give the cup as a gift to a customer, the value of the gift is considered to be $10.

Further Reading

The source for this post and for more information on this subject is Revenue Procedure 2000-30.

*-In looking around the internet while researching this topic, I came across some opinions (from CPA firms, such as this one) advising that banks might sometimes issue a Form 1099-MISC rather than a 1099-INT. The 1099-MISC would be issued, according to some accountants, if the prize was for using direct-deposit rather than for opening the account. Since my post here is focused on the taxpayer side, I won’t delve into this 1099 issue. The bottom line on the taxpayer side is, a prize for opening a bank account may be taxable.