What if the IRS Starts Taxing Points and Miles?

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IRS Taxes
Recently, my brother passed along this article to me. If you frequent Boarding Area or other travel blogs, you may have caught this article by View From The Wing, as well. If you don’t want to read either of those articles, I’ll sum it up for you… The IRS wants to tax airline miles and likely all loyalty programs.

Should We Be Worried?
Yes and No.

Our government always seems to be increasing taxes, adding new taxes, and finding new ways to earn take money from us. That would be fine if they used our tax money on important things, like roads (I’m looking at you Michigan – our roads suck!). However, this isn’t a political blog, so that’s neither here nor there.

 

Yes we should be worried. If they tax airline miles, credit card points, and other loyalty programs, they will significantly devalue. That’s bad news. If they do tax these programs, the value of credit card sign-up bonuses and manufactured spending would also be much lower. Will it actually happen though? I kind of doubt it.

The outrage this new tax would create, would likely bring its demise. Maybe that’s too optimistic, but with the size of the points and miles community as well as the amount of credit card owners who are a part of these loyalty programs, there would be many people opposed to it.

And if They do get Taxed?
We’re screwed. Every loyalty program we’re enrolled in, will be devalued. Whether that’s a significant devaluation or not, the programs are still devalued. I think the devaluation would be large enough to out weigh the costs of manufactured spending and thin out the herd or put a stop to it altogether. Now that may be my pessimistic side talking, but when something like this comes out of nowhere, it’s worrisome.

All we can do is watch and wait. What are your thoughts on this proposed change?

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