Frequent-flyer miles attributable to business travel are not taxable.

• Author: Fiore, Nicholas J.

Most major airlines offer frequent flyer programs, under which passengers accumulate miles for each flight. Individuals may also earn frequent-flyer miles or other promotional benefits, for example, through rental cars or hotels. These promotional benefits may generally be exchanged for upgraded seating, free travel, discounted travel, travel-related services or other services or benefits.

Questions have been raised as to the taxability of frequent-flyer miles or other promotional items received from business travel and used for personal purposes. There are numerous technical and administrative issues relating to these benefits for which the IRS has offered no official guidance, including the timing and valuation of income inclusions and the basis for identifying personal-use benefits attributable to business (or official) expenditures versus those attributable to personal expenditures. Because of these unresolved issues...