This Seems Like A Perfectly Horrible Idea


IRS Sets Sights on Frequent Flyer Miles, Hotel Points – this seems like an awful idea.  Can they truly wring anything meaningful squeezing out mileage benefits?  Who are the people that really benefit from these anyway?  If you want to raise revenue then really the most sensible place to do it is progressively and arguably more on wealth than labor.  Taxing miles seems an exercise in complexity to raise very little and squeeze plenty of people who are likely for the most part solidly middle class.

As noted in the article, Citi provided 1099’s (although I did not receive one) for sign-up award bonuses.  Getting the 100k AA Citi card this year with the unwaived annual fee, paying taxes on top certainly wasn’t part of my plan…  and at what mileage valuation?  Miles and points are an illiquid currency and their actual value is very dependent on point in time redemption.  That value could of course vary all over the board and is a subject and debate and calculation even among the big blogger points and mileage experts.

I received a 1099 for a prize I won of US Airways miles, valued at 3.5 cents per mile (cpm) as that is what TPG had to pay for to transfer them to me.  I argued their own site valued them much lower, and their evaluation times the amount I won was not enough to actually hit the IRS’s gift threshold, of $600 IIRC.  Their accountant agreed with me so thankfully that went away.  Cash back cards are not considered taxable to my understanding as the cash back is considered a rebate.  What of the future of mileage taxation?  In the end I think it will just cause all parties to lose.  BOO.  Hopefully hotels and airlines can successfully defend their programs.  What is next, taxing me for my sandwich stamp?

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