Taxing frequent flier miles?

[wanderer]

Citibank caused quite a stir when they sent out tax forms for customers who have cashed a lot of miles. They did the math and figured out that each mile was worth 2.5 cents. No one was very happy about this move, even though taxes are required for gifts and prizes. What do you think? Are frequent flier miles taxable? Should they be?

[summerbuns]

2.5 cents for each mile! Are they kidding? I happen to have 5,000 miles and I can only trade it in for $25 statement credit, that is 0.5 cent for each mile. i know that Citibank does not pay 2.5 cents a mile - which means that if they even if they pay 1 cent per mile in bulk but write off 2.5 cents a mile THEY are making money on the tax write off

[Thetravelflex]

this is what I think wanderer...I have no problem with Citibank reporting the miles. The problem is citybank's valuation on the miles. When it takes 30,000 miles for a round trip domestic ticket and most round trip domestic flights are no more than about $400, how can they say that the miles are worth 2.5 cents each. This would value a round trip domestic ticket at $800 which is ridiculous and more than double the true value.

[Sandradullock]

a bank being blamed for yet another deceptive banking practice? no surprise there! These banksters are just never going to learn and we the people need to wake up. Citibank is transferring their tax from them to us and sticking ud with the tax bill. They are exploiting a loophole in the law that allows them to value the miles, so they have inflated the price.

[wanderer]

Exactly, I agree with both you. Citibank is getting in trouble for this, and that's probably a good thing.

[future2back]

the frequent flier miles issue is ridiculous..you know what I say? it's time to get our own over Citibank. What you can do is take advantage of Citibank offers on it's credit cards. The last offer I signed up for was 50000 points when you spent $2500 in 3 months. The points are worth $500 so, all you gotta do is get the card, spend 2500, and get $500 back (non-taxable because it is a rebate)...then of course, close the account, presto!

[findthelock]

you're sure about this? I was told by my bank manager that a reward given for opening a checking or savings account is not considered a rebate since you don't spend any money to receive it. So the gift is instead treated as interest income, meaning that it's taxable.

Originally Posted by future2back

the frequent flier miles issue is ridiculous..you know what I say? it's time to get our own over Citibank. What you can do is take advantage of Citibank offers on it's credit cards. The last offer I signed up for was 50000 points when you spent $2500 in 3 months. The points are worth $500 so, all you gotta do is get the card, spend 2500, and get $500 back (non-taxable because it is a rebate)...then of course, close the account, presto!

[future2back]

your bank manager said? well, I rest my case! how can we trust bank managers when they're just following orders? think about it...smaller gifts, such as mugs, aren't reported by banks, but an iPad or other pricey gifts they give you are reported, it doesn't make any sense!

[gracedavid]

the background story to this is basically...Last February Citibank gave away a huge number of frequent flyer miles as part of a promotion. Now, customers who took part in the promotion are receiving 1099 forms, declaring that those miles are taxable income.

[mitraveler]

There's always a bottom line! I signed up for one of those $100 bonuses when you open a bank account last spring, and I just got a tax form in the mail for $100 in interest. I guess there's no free money, eh?