> You earn a handful of frequent flier miles this year after a couple of trips home to see Grandma? Nah, that's not taxable.
Those would never be taxable, as you paid for the miles. When a company sends you a rebate check for an item you bought for personal consumption or when you buy a gift card, it's also not taxable income as it's in exchange for [post-tax] money that you paid.
> But if you travel multiple times per week for work and accrue tens of thousands of dollars worth of flier miles that you get to keep? Not taxable income for some reason.
The IRS alludes in their policy statement to the complexity as being the reason to not treat it as income. If I flew for work for a decade and accrued a bunch of miles and redeemed them only later, in what year would they be taxable? If I mixed personal and business travel in earning miles, what portions would be taxable and when? If the miles are subject to a substantial risk of forfeiture, that would usually be treated the same as other possible future income which is still subject to a risk of forfeiture (which is to say: not be taxed until that risk has collapsed to zero).
> Those would never be taxable, as you paid for the miles
Good point.
> If I flew for work for a decade and accrued a bunch of miles and redeemed them only later, in what year would they be taxable?
The year you redeem them I would think. Just like you don't recognize typically recognize investment gains until you actually sell and receive those gains. It'd be nonsensical to tax me on fake airline bucks for an airline that might be out of business later this year, or might devalue their points. The (as I would see it) taxable benefit occurs when I successfully redeem those fake airline bucks for a real, valuable service.
> If I mixed personal and business travel in earning miles, what portions would be taxable and when?
Seems like you'd need to maintain separate accounts, so when you redeem them you say, "yeah I'm using 20k points from my personal account and 30k from my employer-paid perk account, knowing I'll be taxed on the current value of the 30k taxable points".
Overall it does seem like a PITA, it's just funny to me because "this is too much of a pain to deal with so let's ignore it" doesn't seem like something the IRS usually says. I suppose overall the issue must be (as another commenter put it) "small potatoes" to the IRS.
And itβs small potatoes mostly. Leaving aside airline status-which would be impossible to value even my 50K miles per year pre-pandemic (some of it personal) would only be worth $500 or so at a penny per mile.
Those would never be taxable, as you paid for the miles. When a company sends you a rebate check for an item you bought for personal consumption or when you buy a gift card, it's also not taxable income as it's in exchange for [post-tax] money that you paid.
> But if you travel multiple times per week for work and accrue tens of thousands of dollars worth of flier miles that you get to keep? Not taxable income for some reason.
The IRS alludes in their policy statement to the complexity as being the reason to not treat it as income. If I flew for work for a decade and accrued a bunch of miles and redeemed them only later, in what year would they be taxable? If I mixed personal and business travel in earning miles, what portions would be taxable and when? If the miles are subject to a substantial risk of forfeiture, that would usually be treated the same as other possible future income which is still subject to a risk of forfeiture (which is to say: not be taxed until that risk has collapsed to zero).