In 2002 Citibank sent customers an IRS Form 1099, documenting “miscellaneous income,” at a rate of 2.5 cents a mile, to customers who had signed up for the American Airlines AAdvantage credit card and received their 40,000 AAdvantage miles as a signup bonus.
According to the Tax Foundation, a research group that tracks tax issues, the IRS may be on the verge of imposing a tax burden on miles and points earned through loyalty travel programs. In response to these claims, hotels and airlines have sent Treasury Secretary Jacob Lew a letter asking him to rethink the proposed policy and suggesting that any changes should come from Congress through the legislative process.
While the IRS plans to impose taxes on miles it is not yet clear if they will begin to allow tax deductions for donating miles/points to charities that qualify for deductions, something they have refused to accept in previous years.
What are your thoughts? Should the IRS really tax miles & reward points that you earn from flying or spending?