There has been no official guidance on cashback from the IRS and as such we recommend that you speak with your tax attorney or accountant about the best way to file your return.
What is Cashback?
Some large providers (such as crypto.com) offer users a cashback card, which is like a debit card, and can be used to make purchases of goods and services in fiat from most retailers (ie for your groceries, buying a car or a TV).
Cashback rewards are received in cryptoassets (ie in CRO/MCO on crypto.com) for using the cashback card, based on the amount of purchases made with the card.
How is Cashback treated for tax?
Based on the existing guidance, the IRS is likely to consider the “cash-back” rewards as non-taxable “rebates.” The IRS has previously used this treatment for traditional cash-back rewards, points, and airline miles earned through credit cards.
The rationale for this tax treatment is that the rewards are an after the fact discount to the underlying purchase price.
Capital gains on subsequent disposals
It's important to note the cost basis of any assets that you receive as a reward as these may go up or down in value. When these are sold you will create a taxabale event that should be treated for 'Capital Gains Tax'.