Are miles earned on my employer's credit mine, and are they taxable?
Cathleen McCarthy is a journalist whose articles on travel, commerce and consumer topics have appeared in dozens of publications. She writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com
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Dear Cashing In,
belong to a nonprofit organization and have a business mileage credit card.
Could I use these miles for personal use, or could I buy them from the company?
Please advise, I do not want any IRS
issues for me or my organization. The card is in my name. -- Anees
Judging from your question, it sounds like you have a small-business credit card, which is different from a corporate card. Small-business cards are usually issued in the name of an individual, who shares payment liability with the company. A corporate card is issued in the organization's name and usually -- though not always -- liability for payment rests with the corporation.
the card is in your name, it was issued based on your credit record and the
miles are yours to use as you see fit. Unless your organization stipulates that
you consider those miles a benefit to be used for company business only and
requires you to account for them, I would view them as a perk of the job.
Points earned on a corporate card are owned by the company,
but even then, the points awarded by the airline
for the miles you're flying are yours. If it's your name on the plane ticket,
those are your miles.
As for Internal Revenue Service
issues, you shouldn't worry. The last official statement by the IRS
regarding the use of business-earned frequent flier miles and credit card
points indicated the feds do not, at least for now, consider ordinary miles as income.
Issued in 2002, the statement says: "Consistent with prior practice, the IRS
will not assert that any taxpayer has understated his federal tax liability by
reason of the receipt or personal use of frequent flier miles or other in-kind promotional
benefits attributable to the taxpayer's business or official travel. Any future
guidance on the taxability of these benefits will be applied prospectively."
checked with a CPA and he says reward miles earned on a company credit card are
still considered a non-issue at tax time. "There have been no additional
pronouncements from the IRS
since then, which could lead one to believe that they have no desire to get
involved in this issue, especially since it's been over 10 years since their
last comment on the subject," says accountant Paul Conway.
caused a stir in 2012 when it issued 1099 tax forms
to customers, requesting they report to the IRS
the value of frequent flier miles they had received as bonuses for opening new bank
accounts. Two people filed a federal lawsuit, claiming Citibank should have
warned customers before issuing the incentive. They also asserted the award shouldn't
have been taxable in the first place.
The IRS said Citi was right: Bonus awards are taxable when they're an incentive to open an account, since they are not "earned" through spending, as
credit card rewards are. You're on safer ground with a credit card, given that your
dilemma is specifically addressed in the 2002 statement.
See related: Who owns frequent flier miles from a corporate credit card?, Reward point 'gifts' are taxable, says the IRS, Reward point 'gifts' are taxable, says the IRS
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