Using a mileage ticket for a business trip - tax implications

Discussion in 'General Discussion | Miles/Points' started by Lalala, Feb 9, 2011.  |  Print Topic

  1. Lalala
    Original Member

    Lalala Silver Member

    Messages:
    269
    Likes Received:
    181
    Status Points:
    445
    I did some self funded professional development last year including one trip overseas where I presented a paper. I used two halves of two separate award tickets and redeemed hotel points because hotel rates were over 400 dollars a night for my stay. Is there any way to claim any of the ticket value towards my trip expenses? I did fly a premium class, but am happy to keep things at what it would have cost me in economy. I would just like to claim as many of my out of pocket expenses as possible.

    Thanks for any help or links you can provide me to get me organized.

    lala
     
    Wanaflyforless likes this.
  2. gleff
    Original Member

    gleff Co-founder

    Messages:
    3,616
    Likes Received:
    6,793
    Status Points:
    4,670
    Not really, unless you were taxed on the value of the miles when you received them.

    For instance, if you received a 1099 from Citibank for having earned promotional miles, it would seem to me that spending those miles would them be either unreimbursed business expense (if spent on behalf of your employer) or a schedule C expense.

    But if you have no taxable basis in the miles, you can't write off the miles.

    Similarly, if you don't miles to a charity you cannot take a tax deduction.

    Flip side is though that under most circumstances we aren't taxed for receiving the miles, and that's great, I don't think I'd trade for a world where the miles were taxed on the way in but also allowed to be expensed on the way out.
     
  3. Gleff is right. Here are two other ways of thinking about this:

    From a theoretical standpoint, you might have been able to expense the room if you paid cash because you have already paid income tax on the money you use to pay for the room. In effect, you're saying to the IRS: this isn't money I should have earned as income, this is money that my business (Me, Inc.) should have spent on me and never paid out to me in the first place.


    A second, slightly more complicated way of looking at this: you're allowed to expense the full cash amount because your basis in cash is it's face value. Your basis in your miles is zero. When you redeem them, you do so at FMV. Normally, such a transaction would require that you pay tax on the difference between basis and FMV. However, miles are exempt (due to some revenue rulings pushed through by congressional pressure; turns out congresspeople and their staffs like their tax-free miles as well). You'd be able to deduct the value of the miles if you had paid tax on the miles (or their gain) in the first place.

    Note and caveat: there's an open question here about whether "self-funded professional development" is expensable at all, even if you pay cash. Even if it is deductible, it's probably subject to the 2% floor -- that is, you can only deduct if your total expenditures for the year exceed 2% of your AGI.

    Additional caveat: while I have a law degree and have passed the bar, I am not a tax expert.
     
  4. Lalala
    Original Member

    Lalala Silver Member

    Messages:
    269
    Likes Received:
    181
    Status Points:
    445
    Thanks. Great explanations. Will talk to accountant next week.
     

Share This Page