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Weigh All Factors For Bank Account Sign-Up Bonuses

Have you seen the ads promising a cash reward for opening a new bank account? You may be offered a bonus of $100 or more just for signing up. But be aware that strings are attached.

For starters, promotional giveaways, awards, and prizes are subject to federal and possibly state and local income tax. This applies to everything from bank deposit offers to lottery winnings to cash prizes that accompany Oscar and Grammy awards. (Recent legislation exempts Olympic medal winners from tax.) You'll receive a Form 1099-MISC and must report the income on your tax return.

In other words, if you get $100 from a bank and you're in the 25% tax bracket, you'll owe Uncle Sam $25 on your sign-up bonus.

Consider these other potential drawbacks:

Bottom line: Sign up for an offer only if it otherwise makes sense for you.