Business Travel Tax Deductions

Unrelated but Scott's claim to fame was being on-board the SW flight that mistakenly landed in Branson. http://abcnews.go.com/US/southwest-jet-makes-crazy-landing-wrong-airport/story?id=21510629

There may be some tax implications if you earn frequent flyer miles on travel paid for by your employer. I've recently encountered this and have been talking with a few tax professionals. If miles are earned and travel is paid for by employer, there's some questions about whether they are a benefit or bonus of employment and potentially taxable. Worth investigating if that's how people are earning miles.

Thanks, Parag. Yes, my foray onto One Mile at a Time was but a prelude to my Southwest flying experience!

VeryGoodPoints, I have not seen or heard of employers reporting taxable compensation on either a W-2 or a Form 1099 to their employees for miles earned on business travel; have you? That would certainly make for some unhappy employees, I'd imagine.

How did the employer know how many miles you earned in order to issue a W-2 or 1099? Some people don't participate in any loyalty programs; conversely others have varying status levels that confer bonus points.

Damn I wish we had as many tax deductions available over here!

@ VeryGoodPoints, the IRS's current position can be found in Announcement 2002-18:

"Consistent with prior practice, the IRS will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent flyer miles or other in-kind promotional benefits attributable to the taxpayer’s business or official travel. Any future guidance on the taxability of
these benefits will be applied prospectively. "

I would argue any taxes or fuel surcharges on a frequent flyer ticket used for business IS DEDUCTIBLE.........but others can do as they so choose..........

Scott, if my employer reimburses only up to a certain amount of the IRS per diem limits - eg, $10 for lunch or $15 for dinner even in cities with a much higher IRS limit - can I deduct the remaining amount up to the standard per diem or up to the actual amount? If so, in this case would i be required to follow one of these two or can i still choose? Thanks!

I understand that used award miles can not generate tax reductions...

But, can I write off the purchase of miles for travel? Say I have a 27 hour flight, and I need to work on the plane and have a medical condition that makes coach unbearable without heavy pain medication... If upgrading my ticket costs $500 and 30,000 miles and I spend $600 to purchase those miles from the airline; can I deduct the $500 for the upgrade cash portion and the $600 i had to spend to get the miles to fulfill the milage portion of the upgrade?