In response & for others' reference in the future, here's the "why":
I attempted to do a similar IAD-SFO-IAD Business Class booking at my local Turkish Airlines office today and was also quoted an inordinately high amount in taxes (about US$355 roundtrip, also close to the cost of a Y ticket).
This is similar to a BWI-SFO redemption I attempted 3 months ago (I paid the US$150+ in taxes on that occasion since I wanted to be on that flight)
Frustratingly I actually know exactly why this is happening:
- When pricing the taxes, TK's system requires the agent to key in an appropriate fare class to calculate taxes.
- For United Domestic Business Class redemption (Fare Class "I"), the fare class they use to calculate taxes is either "F" or "C". Both of these have high base fares
- As a result, the US Transportation Tax (US) which is a Percentage Tax (7.5% of airfare), is calculated off the full F class fare which is around US$2.2k each way
- The rest of the Taxes (ZP) (XF) (AY) are not percentage taxes and thus aren't affected, they are charged correctly by TK
Now this Percentage Tax shouldn't actually apply to Mileage Redemption Tickets as per the IRS Publication 510 (as per
https://www.irs.gov/pub/irs-pdf/p510.pdf, pg27). However, knowing TK, I'm not sure if there will ever be a change in their systems.
Their agents were very helpful (I know the local team) but unable to do much due to the system limitations. I'm going down again tomorrow and will see if they manage to resolve the case with their Star Alliance liaison at United.
Interestingly there is apparently an option to claim wrongfully charged taxes back from the US Government via IRS Form 8849- not sure if anyone has successfully tried this route!