Not only can they be used for flights or upgrades, they are increasingly being used as negotiating tools. But are they really worth all the trouble?
People often ask me if frequent flyer miles are taxable, and the answer is no. According to the IRS, it “…has not pursued a tax enforcement program with respect to promotional benefits such as frequent flyer miles.”
Using airline miles and credit card rewards to help pay for a business expense, however, will reduce the cost basis of the goods being purchased. For example:
- You buy a $499 laser printer for your business
- Luckily, you can save $50 by using your credit card rewards points
- You are then only allowed to deduct the balance of $449 as a business expense
Some people just don’t “get” rewards programs – and I get that. They point to the fact that flights are cheap and that the rewards come with so many conditions they are, more often than not, unusable. Personally, I horde my miles use mine because I feel like I would be wasting them – I’m always saving them for “something good.”
I think a fair middle ground to walk is to use miles for vacations and long-distance flight.
Judith Heft, Principal, Judith Heft & Associates is a personal financial concierge with offices in Greenwich and Stamford. She can be contacted via email at email@example.com or by phone 203-978-1858.