MasterBlaster
Thinks s/he gets paid by the post
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- Jun 23, 2005
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Income tax on miles offers.
Quote: "Citi customers ..... Now, the Los Angeles Times reports that these customers are receiving 1099 tax forms ..—.. One customer .... shocked to get a 1099 for $645."
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Tax on frequent flyer rewards may only be due when you don't have to make a financial purchase on other things to get them. If you get your miles as a sign-up bonus or other promotion they are probably not taxable as income. But there are some caveots...
Taxes & credit card rewards | Bankrate.com
There's been some confusion about how the Internal Revenue Service views rewards points.
The uproar started when some Citi customers received a 1099-MISC tax form from the bank for the reward miles they got after signing up for a new checking or savings account. The bonus rewards were part of a promotion by Citi.
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That got people worrying about other rewards miles or points, specifically those tied to credit cards. Are those taxable as well?
Probably not, says Mark Steber, chief tax officer at Jackson Hewitt Tax Service. Traditional rewards you earn by spending money on your credit card are considered nontaxable because it required a financial activity to receive them, Steber says.
The waters get a little murkier when it comes to sign-up bonuses offered by credit cards issuers. Those are the kinds that offer you 30,000 miles or a $300 bonus just for getting the card.
"Those are more complicated and convoluted deals," Steber says, but most of them aren't taxable. Feel free to exhale now.
The reason is because those offers usually come with some kind of transactional hoop to clear before the bonus lands in your pocket. For example, last year the Citi ThankYou Premier Card offered 50,000 points for signing up ($665 in airfare value), but only after cardholders spend $2,000 in three months, according to Synovate. That last part makes the bonus exempt from taxes, says Steber.
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