Originally Posted by
dhuey
I think that bonuses for opening accounts (be they credit card, checking or savings) are not taxable income -- they are a rebate.
Federal regulations require banks to treat bonuses (above certain de minimus amounts) as taxable income, valued at the "fair market value". The regulations are silent on the question of how to determine the fair market value of frequent flier miles, which is what creates room for ambiguity.
Originally Posted by
dhuey
Forgive me if you've already weighed in on this, but doesn't it seem like the BankDirect Mileage Checking account is generating taxable interest in the form of miles? Several here have posted that they are not getting 1099-INTs for the value of the miles.
Citi is unusual in reporting frequent flier miles as taxable income.
An ABA (American Bankers Association)
publication from 11/05 may shed some light on why other banks don't. It says:
The IRS has ruled in the past that frequent-flier points earned by an employee or a member of an airline program are not taxable due to the valuation difficulties. Hopefully the same reasoning would apply to financial institutions that give their depositors frequent-flier points redeemable for travel or gifts purchased from a specified airline. Similarly, because no value can be determined, no bonus disclosures are necessary under Truth in Savings.
The ABA has no regulatory authority. This is just their interpretation of the relevant laws and regulations.