First things first, I am NOT a tax advisor so please consult your tax advisor about your specific situation.
Frequent flyer miles, hotel rewards and any promotional discounts offered by credit card companies are generally not considered taxable income, therefore you don’t need to worry about including any of your miles on your taxes. As a few exceptions, if miles are awarded as prizes, such as in a sweepstakes, then they may be taxable.
Or if you do have a small business, then rewards or discounts can reduce your tax-deductible expenses. For example, if you have a flight that cost $300, but you use a $100 discount (say on Delta, for 10,000 points), then you can only deduct $200 as a business expense.
In 2012 there was a class action lawsuit against Citibank because they issued a form 1099-MISC to all customers who received their “Thank You Points” for opening a new account, but did not disclose this to customers at sign up. You can read more about the court’s ruling in this Forbes article.
The majority of us don’t need to worry about our miles balances when filing our tax refunds this year, but there are a few ways you can earn miles or free money from filing your taxes.
- Purchase tax preparation software, such as Quicken or Turbotax, through an online shopping portal, or at office supply stores where you can earn 5x points per dollar.
One of the better offers I see is the chance to earn 1,000 Southwest points by filing with Turbo Tax, which is what we plan to do. Visit the Southwest shopping portal and search for Turbo Tax. Here’s the fine print:
- If you’re lucky enough to receive a refund this year, you can receive a $20 credit for having your refund deposited into your Serve or REDCard account. T-Mobile Money apparently has a similar offer. The Serve/REDCard appears to be a targeted offer, so check your email. You can only deposit your refund into an account with your name on it. Doctor of Credit has a series of posts on this topic, including how to split your refund among multiple accounts.
Also, NEW Bluebird or Serve accounts are eligible for a $10 credit.
- If you owe money to Uncle Sam this year, you can earn miles by paying with the right card.
Credit cards typically aren’t the best way to go because you’ll be assessed a fee of 1.87-2.35%. Do the math for yourself to figure out if the points you’ll earn are worth the fees.
Using your debit card is a flat fee, $2.49-$3.50. Unless you have a debit card like the Suntrust card that earns miles, you may want to consider using Bluebird (loaded with pre-paid giftcards, which you earned miles on at point of purchase).
Filing taxes is not typically a fun process, but hopefully you’ll all have money coming your way and can earn some extra miles and a statement credit or two in the end.