Can Credit Card Reward Liabilities Be Deducted Sooner? The IRS Says Yes (In Some Cases)

For businesses that issue credit card rewards, there’s good news from the IRS. The Office of Chief Counsel recently confirmed that credit card companies may be able to deduct reward liabilities sooner by using the recurring-item exception under tax regulations.

Here’s the quick breakdown:

What’s the recurring-item exception?
Usually, businesses can only deduct expenses when they’ve been paid. But under the recurring- item exception, companies can deduct certain liabilities earlier if they’re fixed, predictable, and paid within 8.5 months after the tax year ends.
How does this apply to credit card rewards?
Credit card companies often let customers earn points or cash back. According to the IRS, when those rewards are redeemable for cash or statement credits, the liability becomes fixed and determinable—meaning the company can deduct the expense sooner, even if the rewards haven’t been redeemed yet.
What makes this different from other cases?
The IRS made it clear that this situation is different from a case involving , where customers had to make an additional purchase to redeem rewards. The IRS says that because no extra purchase is needed to redeem credit card rewards, it’s easier to classify the liability as fixed.

Why It Matters for Businesses

If your business offers a rewards program, you may be able to deduct those liabilities earlier to reduce your taxable income. However, you’ll need to meet certain criteria to qualify for the recurring-item exception.

This is a complex tax issue, so it’s best to work with a tax professional to ensure compliance and take advantage of any eligible deductions.

Get to know me more

Hi, I’m Alfred Beato, founder of Legacy Advice Group, and I’ve dedicated my career to helping clients navigate both their business and personal finances with clarity, care, and proactive advice.

My journey in public accounting started when I was just 15 years old, working part-time at a small CPA firm. What began with making copies and organizing files quickly turned into learning the fundamentals of bookkeeping and tax preparation, and from that moment on, I knew I wanted to build my own firm one day.

After earning my bachelor’s degree from FIU in 2015, I joined Appelrouth, Farrah & Co., a respected CPA firm in Coral Gables. It was here that I gained invaluable hands-on experience — not just preparing tax returns but learning how to work directly with clients, build relationships, and offer meaningful advice.

Throughout my time at Appelrouth, I also continued working with another CPA firm — my brother’s practice, Beato Pimentel & Associates. Whether it was providing input on client engagements or assisting with operations, this experience allowed me to gain a deeper understanding of the entrepreneurial side of running a firm.

In 2020, I completed my master’s in taxation from NOVA Southeastern University, further refining my knowledge in tax planning and advisory services. These experiences taught me to think beyond the numbers and approach every client relationship as a trusted advisor, not just a tax preparer. This foundation has shaped the way I serve my clients today.

Why I Started Legacy Advice Group

I’ve always known that I wanted to be self-employed. The idea of building something meaningful and helping clients on my own terms has been my goal from day one. Over the years, I’ve had the privilege of working with some incredible firms, learning everything from client engagement and billing strategies to tax planning and business advisory. But at the end of the day, I realized that no one firm could fulfill my dream of running my own practice.

That’s why I started Legacy Advice Group. It’s about more than just compliance work — it’s about guiding clients through their financial journey and helping them build a legacy for their families and future generations.

My Ties to Latin America

With roots in Cuba and the Dominican Republic, and being fluent in both English and Spanish, I’m proud to bring a unique perspective to my practice. Many of my clients have ties to Latin America, and I understand the cultural and financial challenges that come with managing cross-border finances.

Our team at Legacy Advice Group also shares this diverse background, allowing us to better serve clients from all walks of life — whether they’re navigating U.S. tax compliance or managing foreign investments.

Connect With Me

I believe in building relationships with my clients beyond the numbers. If you’d like to get to know me better, feel free to connect with me on social media:

I share both personal and professional updates, and I welcome you to join me on this journey as we grow and build together.

What Sets Me Apart

Legacy Advice Group and I are one and the same. As much as I’d like to say the business operates separately from me, the truth is that it doesn’t. This industry — like any business — demands time, energy, and attention to detail. Things don’t just happen on their own.

Because of that, every client relationship is personal to me. I don’t take a one-size-fits-all approach. Whether it’s reviewing your tax return in detail, helping you structure your business, or guiding you through a complex financial decision, my goal is to ensure you feel heard, understood, and supported.