millionmiler

In the long term we are going to see more fare based earning. Its already moving in that direction obviously. As for 3rd party based earning its more complicated as airlines earn income from that. Some voices would say that restricting award inventory is the near to medium term solution to that particular problem. The near term profits from the collapse in fuel prices might provide cover for the change - or it could reduce the impetus for change.

As for the credit card tax issues I'll say that personally I hope it never happens and leave it at that.

wjj

I can't see it ever going there. If an administration tried to change it via regulation, it would be politically toxic since rebate treatment has been in place for decades (recall many years ago when I believe the Clinton Treasury Department floated ruling that FF miles earned on business flights but used for personal purposes constituted compensation income - there was an uproar and it died on the spot). It would take a statutory change and I can't ever see that happening.

This goes way beyond cards giving miles for using the card. Take the Costco AMEX for instance. You earn cash back from Costco plus cash back from AMEX. None of this is taxable. It is nothing more than a rebate, same as the miles. And no different from the hundreds of cash back cards out there.

"Gifts" given to open or add to deposit accounts have always been treated as interest income. Nothing new about that at all.

imapilotaz

To take it one step further... if you dont have ownership of something, how could you be taxed on said item? AA makes it abundantly clear they own the miles, we own nothing.

FWAAA

I disagree, as that was not the basis for the regulatory grace shown taxpayers years ago when the IRS declined to tax miles awarded on tickets purchased by employers.

I can think of plenty of situations where taxpayers would have section 61 income by virtue of the use of something. Say your employer leased a house for $4,000/mo and let you and the family occupy it even though none of the tax-free exceptions apply. And the employer leased two luxury autos for you and the spouse for $1,000/mo each even though you have no employment-related need for a company-provided car. And your employment deal says the employer can take back the house and cars at their whim.

In that example, your W-2 would show $72,000 at the end of the year attributable to the house and the cars, without taxpayer ownership of any of it.

Miles won in contests are taxable, and if your argument was accepted, then nobody would have to pay tax on the million mile prizes.