Roth IRA as destination account for credit card cash back?

[Spock]

Watched a video last night about the Fidelity Visa credit card. As those of you who have one know, the cash back rewards from that card must be routed to a Fidelity account.
"Eligible accounts include most nonretirement registrations as well as Traditional IRA, Roth IRA, Rollover IRA, SEP IRA, Fidelity Charitable® Giving Account®, Fidelity HSA®, and Fidelity-managed 529 College Savings Plan accounts."
I've been having it dump into my brokerage account... the new idea would be to have it go into the Roth IRA.
Has anybody done this?
With no W2/Earned Income, my only deposits into the Roth now days are conversions from traditional IRAs.
Are there any IRS/tax return considerations of having credit card cash back auto-redeemed into the Roth IRA?

 

[PaunchyPirate]

I suspect you can only dump it into your Roth IRA if you have earned income to qualify you to contribute to your Roth. In other words, the Fidelity contribution is counted as part of your annual contribution -- a nice benefit if you are working and qualify to contribute to a Roth.

I'll be surprised if Fidelity can just put money into your Roth without this consideration. But I'll admit, I'm giving my opinion. I do not know for a fact.

 

[Koolau]

I don't think it much matters how you fund your Roth as long as you have the legal right to fund it (have earned income within certain limits, etc.). I have funded my kids Roths and there are no problems with that, so I don't think it would be a problem to fund your Roth from CC cash back. I'm no expert so YMMV.

 

[SecondCor521]

Watched a video last night about the Fidelity Visa credit card. As those of you who have one know, the cash back rewards from that card must be routed to a Fidelity account.
"Eligible accounts include most nonretirement registrations as well as Traditional IRA, Roth IRA, Rollover IRA, SEP IRA, Fidelity Charitable® Giving Account®, Fidelity HSA®, and Fidelity-managed 529 College Savings Plan accounts."
I've been having it dump into my brokerage account... the new idea would be to have it go into the Roth IRA.
Has anybody done this?
With no W2/Earned Income, my only deposits into the Roth now days are conversions from traditional IRAs.
Are there any IRS/tax return considerations of having credit card cash back auto-redeemed into the Roth IRA?

I have a Fidelity credit card and to get the full 2% back I have them put my cash back into my HSA. I have them do it automatically every month.

Fidelity treats that 2% cash back as contributions made by me to my HSA, and dutifully reports the total amount to the IRS on their / my 5498-SA.

I assume, but do not know for sure, that Fidelity would behave similarly for you with your Roth IRA.

If your taxable compensation is zero, then any contributions made this way to your Roth IRA would be excess contributions and subject to a 6% per year excise tax - see Form 5329 Part IV.

If you have income from a Schedule C or your spouse has income, you may still be eligible to make a Roth contribution. Can provide more info on that if needed.

 

[mrfeh]

Watched a video last night about the Fidelity Visa credit card. As those of you who have one know, the cash back rewards from that card must be routed to a Fidelity account.
"Eligible accounts include most nonretirement registrations as well as Traditional IRA, Roth IRA, Rollover IRA, SEP IRA, Fidelity Charitable® Giving Account®, Fidelity HSA®, and Fidelity-managed 529 College Savings Plan accounts."
I've been having it dump into my brokerage account... the new idea would be to have it go into the Roth IRA.
Has anybody done this?
With no W2/Earned Income, my only deposits into the Roth now days are conversions from traditional IRAs.
Are there any IRS/tax return considerations of having credit card cash back auto-redeemed into the Roth IRA?

As others have said, you need to have earned income > rewards in order to do this.

Even with earned income, I wouldn't do this myself. I'd want to know exactly how much is being contributed to the Roth, and when. Simpler to just have the rewards go to a taxable account.

 

[Koolau]

As others have said, you need to have earned income > rewards in order to do this.

Even with earned income, I wouldn't do this myself. I'd want to know exactly how much is being contributed to the Roth, and when. Simpler to just have the rewards go to a taxable account.

Agreed. I can imagine needing to back some funds out of a Roth that had too large a contribution when perhaps you talked a distressed car dealership into letting you put your entire car purchase on a Visa card.

 

[Spock]

Thanks for the responses.
Sorry for being stupid... it has been so long since I contributed to a Roth (other than conversions) that I forgot about needing to have earned income in order to contribute, same as a traditional IRA.
In my defense I did try to google first... but all I got where "contribution limits for 2025" articles. I finally found a PDF of IRS Pub 590.

 

[Koolau]

Thanks for the responses.
Sorry for being stupid... it has been so long since I contributed to a Roth (other than conversions) that I forgot about needing to have earned income in order to contribute, same as a traditional IRA.
In my defense I did try to google first... but all I got where "contribution limits for 2025" articles. I finally found a PDF of IRS Pub 590.

Hey, if you are retired early, you're not stupid. We all bring our ignorance here and (heh, heh, for the most part) folks are happy to share their knowledge without judgement. To the extent we helped, we're happy that we could.

 

[evilanne]

Interesting article Are Credit Card Rewards Considered Taxable Income?

Are Credit Card Rewards Considered Taxable Income?

The Internal Revenue Service generally taxes credit card rewards that are not earned through purchases. These include welcome bonuses and credit card referral bonuses.

www.investopedia.com

Fidelity credit card rewards do not generate any tax document deposited into your brokerage account, but even if it did it would not be considered earned income (generally only W-2 or SE income)
Even if you do have earned income I would not recommend directly depositing into your IRA/Roth account, especially if you make other contributions as it would be possible that you could end up with excess contributions which can become a tax issue like SecondCor521 mentioned. Could also be issue with HSA if contributions are close to the annual limit but I'm sure Fidelity tracks all contributions to retirement and tax sheltered accounts and hopefully protects us from exceeding any of the limits.

 

[SecondCor521]

Could also be issue with HSA if contributions are close to the annual limit but I'm sure Fidelity tracks all contributions to retirement and tax sheltered accounts and hopefully protects us from exceeding any of the limits.

Fidelity, and IRA/HSA custodians in general will give you information to avoid exceeding the contribution limits, but they will not prevent you from doing so. Partly because they can't determine the appropriate limit in some cases, and partly because the taxpayer may want to exceed the limit for some unknown reason.