[REPOST] Airline Miles and your Income Taxes
It’s that time of the year again. The 1099’s, W2’s and other tax forms have started showing up in the mail or email. This is also about that time I start getting questions form my readers and friends about the tax implications of all the miles they have earned or redeemed. I posted this article on taxes last year and to the best of my knowledge, there have been no changes to the tax law that would impact your taxes in any way, by way of miles. Read on…
From April 2010: Airline Miles and your Income Taxes
See also: Are Banks sending 1099s for Airline Miles?
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Hi Unroadwarrior, a question puzzling me is to do with purchasing accelerator miles and then later using them for a business trip. Can I just deduct the cost of those miles which are redeemed later as expenses (I have a small start up)? Do the tax folks recognize these transactions? Not knowing the answer to this has prevented me from buying accelerator miles though it would lead to less expensive flying in C.
Levi, I wish I could help you. This is best left for an accountant.
My partner and I each just got 1099s from Citibank for the 25,000 miles we each got as an incentive for opening checking and savings accounts at Citibank. They valued the miles at 2.5 cents per mile, which comes to $425.00 in taxable income. We were so shocked we called Citibank, but got no satisfaction. We then called David Lazarus of the L.A. Times, who wrote the following article.
http://www.latimes.com/business/la-fi-lazarus-20120124,0,1228880.column
I suspect there will be lots of folks with this issue.
Sorry, I meant to say that the Citibank’s valuation of our miles at 2.5 cents each comes to $625.00 (not $425.00 as I posted my mistake). Our 1099s each show $625.00.
It is a knotty one. I enjoy your blog. Thank you.
Tom, Thanks for sharing this. This is not good news if all vendors start issuing 1099s for any miles given. This could devalue miles down to liability instead of an asset. If someone collected 100,000 miles from the recent CapitalOne card promo (I plead the 5th), they may suddenly be on the hook for $700 in taxes! (100,000 * $0.025 * 28% tax rate = $700).
To all readers – Has anyone else received a 1099 for miles? I have personally not.