Today TaxMama hears from Diana in the TaxQuips Forum with a question about a fun topic. “I am hearing some confusing opinions on whether or not I am supposed to claim my awarded airline miles…My husband and I have actually already received some awarded airline miles for opening credit cards this year. I would love to continue taking advantage of some airline opportunities, but would like to know how deep in ” tax craziness” I am first.”
Enjoy the miles. Use them for personal purposes and there is no doubt that there is no tax effect. I don’t believe there is any tax effect when you use them for business, either. It simply reduces your travel costs.
However, if you cash them out, you may have to treat that as interest income or other income. IRS issued some guidance on this in 2002. It wasn’t much. But it basically said it would not bother to tax the miles as long as they were not cashed in; and as long as they were not given as compensation for services (i.e. work). http://www.irs.gov/pub/irs-irb…..b02-10.pdf
So, go ahead and collect all the miles you can – and see the world!
And remember, you can find answers to all kinds of questions about credit card rewards, airline miles and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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