How to Live off a Business that Makes Zero Profit

The latest scam, I mean “arbitrage” opportunity, just dropped.

Fun fact: cash back from your credit card isn't taxed.

I knew a person who lived off their business's cash back from their card. Was like $200-$250k/year.

I think, but am not sure, that there's a limit (like $300k or so).

— Sam Parr (@thesamparr) April 12, 2024

I looked this up to be sure.

Yes, it’s not taxed. Your business won’t be taxed on this, but if you paid yourself out from the cashback, that part will be taxed as income.

Nevertheless, this is still a great opportunity if you do high-volume inventory and can’t manage a profit.

To get $100,000 a year in cashback on a 2% card, you would need to put $5 million of purchases on a card. If you’re a purchaser, this is possible. Even if you’re making extremely marginal profit on the purchasing, enough to cover other business costs, then the cashback could make it worthwhile.

If you’re a bulk food buyer, some credit cards (e.g. Amex) go up to 5% back on groceries.

Some cards may have a limit on what gets cashback though, so obviously check your specifics.

This also does include things like a card sign-up bonus. The reason purchase cashback isn’t taxed is it’s considered a rebate.

I’m not responsible if the IRS sends you to jail. Have fun.