are airline miles taxable gift
That is why some Citibank customers have been receiving 1099-MISC statements. They signed up for a bank account and as part of the marketing to get new customers to sign up they were given 25,000 to 30,000 airline miles. Since these miles are considered a gift and not a reward, they are deemed as taxable income. Here are three different categories of earning airline miles and whether or not that method is considered taxable income. What seems relatively clear is that the miles you earn for using a credit card to purchase items or services are not considered taxable income. You would think not, but some Citibank customers received a 1099-MISC for airline miles they were awarded for signing up for an account in 2011. These customers are understandably upset as there was no clear documentation as to the impact of accepting the extra miles. For example, you received a 1099 for $625 valuing 25,000 American Airline miles valued at 2.5 cents each. However, you can sell American Airline miles on Points.com for 0.41 cents per mile and get gift cards or a PayPal credit. Most Miles & Points Are NOT Taxable. Disclosure: We get a commission for links on the blog. You don’t have to use our links, but we’re very grateful when you do. American Express, Barclaycard, Chase, and US Bank are Million Mile Secrets advertising partners. By law, you’re required to pay taxes on all types of income including lottery winnings, sweepstakes prizes, and other high-value goods received. Is cash earned from using a credit card, or airline miles you’ve racked up over the year, also considered to be a taxable item? Taxation of Credit Card Cashback Rewards. The Bottom Line: Even if the IRS is not enforcing taxation of this ‘income,’ that doesn’t necessarily mean it shouldn’t be reported. In the event airline miles were converted to any type of cash reward or benefit, they would have to be reported as taxable income. Receiving a 1099-MISC form may prompt many taxpayers to simply report the income on their tax returns so they can reduce the risk of being audited. Top Line: You WON’T have to pay taxes on the miles and points earned from credit card sign up bonuses. But you do have to pay them on prizes (for example, winning miles in a sweepstake) and on the sign-up bonus for opening checking or savings accounts with Citi. The Bottom Line: Credit card cashback rewards are not considered to be a taxable award or prize. However, a taxpayer would be responsible for reducing the amount of any deductions claimed for expenses paid using a rewards credit card for the amount of the cashback received. Taxation of Airline Miles. If you’ve been busy collecting airline miles with all of those credit card purchases over the course of the year, the good news is that airline miles are tax-free. At the end of the day whether or not you will need to pay tax on your airline miles is currently determined by how the miles were earned. Your miles earned for swiping your credit card or taking a flight on an airline should be not result in you needing to pay tax. However, if you sign up for a new bank account and the reward is valued in miles, you need to know what the miles are valued at to determine if you’ll owe tax or not.
Yes,airline miles taxable gift.