100 Amtrak guest reward points equal $2.50 (IRS, NARP)

[NW cannonball]

Renewed my NARP membership and got some AGR points for doing that.

A footnote on the contribution receipt was

your help is tax deductible,
with the exception of any Amtrak Guest Rewards points recieved, which are valued at 2.5 cents per point.

Apart from the missppelling of "received"

This would seem to imply that, for tax purposes, AGR points are worth about 2.5 cents -- which is consistent with what others have said. Yes, when "high-buckets" rule , having the points is worth a lot more than that. But overall, 2.5 cents seems a reasonable average value.

So, on my next tax return, I will reduce my deduction for contributing to NARP by 2.5% of the points my contribution earned.

Right?

Huh?

 

[Kat314159]

I'm no accountant but my understanding is that you can deduct narp donation amount less $2.50.

 

[amamba]

Yes I work in philanthropy and that is pretty standard language. As you received something for your donation the tax deductability is reduced.

 

[NW cannonball]

Makes sense to me. Meanwhile, everything changes New rules, new dollars -- thanks

 

[George K]

Glad you brought this up.

I was talking to one of my partners, and I mentioned our trip to New Orleans last March. A portion of the trip was business-related, and so the fees for the course I attended are deductible. He commented that even though I traveled on points, the points have value and I should be able to deduct them along with other expenses I incurred on the trip.

But..wait.

If I donate points to someone, I can't deduct those points: http://www.creditcards.com/credit-card-news/petersen-frequent-flier-miles-deductible-2243.php

First, you need to know that the IRS treats frequent flier mileage redemption as a reduction in the ticket purchase price, not as income. This is good news because if it weren't, then we'd all be paying income tax every time we cashed in our miles. Frequent flier miles are not unlike using a coupon collected from the Sunday newspaper for a free carton of orange juice or a box of Bisquick -- that "free" item or discount is not reported as income to the IRS.

In essence, you can't deduct value from an item that does not have value to begin with, which is why members who donate their frequent flier miles to various charities (i.e. nonprofit causes) are not allowed to take a deduction against the donation. For example, this is the notice for the Make-A-Wish Foundation, which is considered the largest nonprofit to donate miles to:

"Tax deductibility -- The IRS recognizes award points and miles as a gift or an award from the corporation to the individual. Therefore, points and frequent flier miles donated to charity are not considered tax deductible

So you will not be able to deduct your flight if you paid for it using only miles. In fact, there have been cases where employees have actually lost money by using miles for company trips.

So it seems that points have value if I have to deduct them from my NARP membership, but have no value, and are NOT deductible if I use them for travel.

IRS says: http://www.irs.gov/taxtopics/tc511.html

Deductible travel expenses while away from home include, but are not limited to the costs of:

1. Travel by airplane, train, bus or car between your home and your business destination. (If you are provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero.)
2. Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
3. Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel and the work location, and from one customer to another, or from one place of business to another.
4. Meals and lodging.

Is that right?

 

[NW cannonball]

Is that right?

I've no clue. Maybe a few lawyers might have an opinion, Maybe the IRS has an official opinion.
I did the OP because it seemed strange to me, and now I've less clue than I had then -- the AGR points system is changing, gift points either have value for tax purposes or not -- my mind is boggling.

 

[Ryan]

That is the official IRS position, and I agree with your interpretation, George.

 

[ainamkartma]

Glad you brought this up.

I was talking to one of my partners, and I mentioned our trip to New Orleans last March. A portion of the trip was business-related, and so the fees for the course I attended are deductible. He commented that even though I traveled on points, the points have value and I should be able to deduct them along with other expenses I incurred on the trip.

But..wait.

If I donate points to someone, I can't deduct those points: http://www.creditcards.com/credit-card-news/petersen-frequent-flier-miles-deductible-2243.php

First, you need to know that the IRS treats frequent flier mileage redemption as a reduction in the ticket purchase price, not as income. This is good news because if it weren't, then we'd all be paying income tax every time we cashed in our miles. Frequent flier miles are not unlike using a coupon collected from the Sunday newspaper for a free carton of orange juice or a box of Bisquick -- that "free" item or discount is not reported as income to the IRS.

In essence, you can't deduct value from an item that does not have value to begin with, which is why members who donate their frequent flier miles to various charities (i.e. nonprofit causes) are not allowed to take a deduction against the donation. For example, this is the notice for the Make-A-Wish Foundation, which is considered the largest nonprofit to donate miles to:

"Tax deductibility -- The IRS recognizes award points and miles as a gift or an award from the corporation to the individual. Therefore, points and frequent flier miles donated to charity are not considered tax deductible

So you will not be able to deduct your flight if you paid for it using only miles. In fact, there have been cases where employees have actually lost money by using miles for company trips.

So it seems that points have value if I have to deduct them from my NARP membership, but have no value, and are NOT deductible if I use them for travel.

IRS says: http://www.irs.gov/taxtopics/tc511.html

Deductible travel expenses while away from home include, but are not limited to the costs of:

1. Travel by airplane, train, bus or car between your home and your business destination. (If you are provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero.)
2. Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
3. Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel and the work location, and from one customer to another, or from one place of business to another.
4. Meals and lodging.

Is that right?

I am neither a lawyer nor an accoutnant or really knowledgeable about anything at all, but my understanding is that the airlines have gone to great lengths in recent years to make it clear that "award" tickets are not "free" tickets, largely to enable them to charge sneaky additional fees on top of the miles cost.

So if you use American Airlines miles to buy an "award ticket" on British Airways to London, for example, you will find that the airlines charge you "fuel surcharges" that are a significant fraction of the cost of a discount ticket. So this ticket is anything but "free". Even more specific example: to fly from PHX to LHR round trip 11/10-11/17 costs 1236 dollars for a discount coach ticket, or 40,000 AA miles + 695 dollars for an "award" ticket. So the "award" ticket has a dollar cost over half of that of the regular coach ticket. Not "free"... Other AA award ticket co-charges are less extreme, but still not zero.

Good luck,

ainamkartma

ps And by the way, the US government charges taxes on these "award" tickets that apply only to paid tickets, not to free tickets...

 

[the_traveler]

In my past life, I was an IRS tax auditor. That is the position that I took. If you had a ticket from A to B that you paid $600 for, you could deduct $600 as your transportation expense. However, if you used a FFP or AGR award, your out of pocket expense for transportation was zero and thus you could deduct zero.

If there were additional charges you paid out of pocket (like the "security" fee, fuel surcharges, etc...), those could be deducted. Also, if your spouse or SO accompanied you, you could only deduct your portion of the trip, hotels and meals.

As an example, you get a bedroom. Since it costs the same for 1 or 2, you can deduct the full cost. Since you both have to additionally pay the "rail fare", you can only deduct your rail fare.

You also can deduct your expense of the course or seminar or training, but not his/her expense.