Cashing In Q&A columns

Are miles earned on my employer’s credit mine, and are they taxable?


A frequent flier wonders if miles earned on her organization’s card are hers. And if so, how does the IRS treat them?

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Question for the expertDear Cashing In,
I 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

Answer for the expertDear 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.

If 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.”

I 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.

Citibank 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 IRSReward point ‘gifts’ are taxable, says the IRS

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