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If I use points for a business trip, can I still deduct the cost from my taxes?
Posted on 9/4/16 at 12:19 pm
Posted on 9/4/16 at 12:19 pm
Inspired by the credit card thread...
I realized that with my 3 kids and my wife and I working full time, our vacations basically center around our business trips (my wife actually has her hotels paid for, while mine are just write offs). Can I use points but then still deduct from taxes?
I realized that with my 3 kids and my wife and I working full time, our vacations basically center around our business trips (my wife actually has her hotels paid for, while mine are just write offs). Can I use points but then still deduct from taxes?
This post was edited on 9/4/16 at 4:20 pm
3
Posted on 9/4/16 at 12:37 pm to AndyJ
Did you recognize the points as income when they were awarded to you?
Posted on 9/4/16 at 1:46 pm to AndyJ
There's your answer - you have already written off the expenses to earn the points
Posted on 9/4/16 at 1:48 pm to AndyJ
Ok cool.
2 questions
1) are you supposed to pay taxes on points (I presume the answer is yes)
2) do most people actually do this? (I suspect no)
2 questions
1) are you supposed to pay taxes on points (I presume the answer is yes)
2) do most people actually do this? (I suspect no)
Posted on 9/4/16 at 2:05 pm to AndyJ
quote:
If I use points for a business trip,
Why would you do that? The ONLY benefit about traveling for business is accumulating the points and you want to use them for a business trip? You been hitting that magic dragon again?
Posted on 9/4/16 at 2:48 pm to CHiPs25
Agree. Points are for pleasure.
Posted on 9/4/16 at 3:05 pm to AndyJ
quote:
1) are you supposed to pay taxes on points (I presume the answer is yes)
The frick I will, it's doesn't let you deduct credit card fees and interest how on earth can they tax credit card benefits??
Posted on 9/4/16 at 5:15 pm to AndyJ
quote:
Ok cool.
2 questions
1) are you supposed to pay taxes on points (I presume the answer is yes)
2) do most people actually do this? (I suspect no)
The answer is a No. You do not owe any taxes on points or cashback earned from credit cards because these are treated as rebates. You owe no taxes on rebates. Straight from an IRS officer btw.
You can't write these off as expenses either. As far as points go (not cb), another reason that it can't be taxes is because it is impossible to assign monetary value to points. You may redeem your points for 0.8c per point while I may redeem the same points for 9c.
As far as paying for business trips with points, here is a relevant article on one of the blogs I enjoy: Hacking Business Travel
ETA: Like others, my suggestion would be to just pay for your business travel in cash and save the points for leisure that you can't write off anyway. Depending on your tax bracket, this could translate to upto 25-30% off on your business trips (Tax shield). And potentially lot more on your leisure trips (subsidized through points).
This post was edited on 9/4/16 at 6:15 pm
Posted on 9/4/16 at 5:24 pm to Old Sarge
quote:
The frick I will, it's doesn't let you deduct credit card fees and interest how on earth can they tax credit card benefits??
You're talking about personal credit card benefits. The OP is talking about points he earned that his business spend produced. Different animals.
Posted on 9/4/16 at 7:58 pm to VABuckeye
ALL tax strategy works, unless you're audited.
Posted on 9/5/16 at 3:22 am to AndyJ
quote:
1) are you supposed to pay taxes on points (I presume the answer is yes)
No. Points are considered a rebate on the purchase not income. Rebates are not classified as taxable income
EDIT: Amerikop already answered but I'm keeping mine too
This post was edited on 9/5/16 at 3:24 am
Posted on 9/5/16 at 10:27 am to AndyJ
quote:
2 questions
1) are you supposed to pay taxes on points (I presume the answer is yes)
2) do most people actually do this? (I suspect no)
About 10-15 years back, the IRS busted a whole bunch of NBA refs for not reporting. They were down grading from first class to coach, and taking the cash or the equivalent in airline miles. The refs' CBA allowed them to do it, but they didn't pay the tax on it. When the IRS came calling some of the refs tried to produced fake receipts.
The judge that was presiding over the case told them, that based on the IRS evidence I would suggest that unless you can prove "diminished mental capacity" to plead guilty.
Posted on 9/5/16 at 7:20 pm to GenesChin
quote:
No. Points are considered a rebate on the purchase not income. Rebates are not classified as taxable income
Right answer, wrong reason.
Rebates are considered a reduction of expenses, sort of like a reimbursement. If I pay $100 for something, and get back $10 rebate in cash, I can deduct a total of $90 for the transaction.
You can't deduct the value of points used as the OP asked, because you have already deducted the expense, when you "earned" the points. In other words, when you made that credit card charge that resulted in the 1 percent mileage or cash back or whatever, you really paid for whatever you were buying, plus your future usage of miles or points.
Tomorrow, the IRS could issue regulations assigning some sort of value to miles/points, and taxing the granting of them as income. This would not be hard to do. However, if they did this, they would also need to allow for deduction, in the same value allocation, for use of the points.
They haven't, because:
1) If people use the points for business expenses, it's a wash.
2) If people use the points for personal expenses, it could be a revenue raiser to the feds, but, it's not a huge amount on a per person basis.
Posted on 9/5/16 at 7:22 pm to TigerintheNO
quote:
About 10-15 years back, the IRS busted a whole bunch of NBA refs for not reporting. They were down grading from first class to coach, and taking the cash or the equivalent in airline miles. The refs' CBA allowed them to do it, but they didn't pay the tax on it. When the IRS came calling some of the refs tried to produced fake receipts.
That was a different situation. That case had to do with expense reimbursements, essentially. The refs had an unaccountable plan, which meant they were not required to turn in receipts to be reimbursed. Because they received more in value than the applicable expense, the difference is taxable income.
Posted on 9/6/16 at 12:04 pm to LSUFanHouston
quote:
LSUfanHouston
Good to know. Makes sense.
As far as trying to tax points goes, I feel like that is just impossible because like I said - How are you going to assign a value to points? Only way I can think of is taxing the difference between the statement credit value and the redemption value. But then since you already paid an AF to have those benefits, does that become tax deductible? Also so many different kinds of points and so many ways to redeem, and so many different price levels for the same redemption. Coupled with the reasons you mentioned, I think the possibility to tax points is remote.
This post was edited on 9/6/16 at 12:06 pm
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