Canadian Court Allows Tax Deduction for Spending Miles in Lieu of Cash

Randy Petersen points out an interesting Canadian tax case where courts there ruled that a person could deduct the value of the miles they redeemed for a ticket to travel for medical care.

The government said the taxpayer could only deduct the taxes and fees — actual out of pocket case — but the Court ruled that he gave up something of value, something which could be purchased from Aeroplan, and that he had ‘paid’ for the tickets so could deduct the value of that payment.

Now, a Canadian court ruling isn’t an issue for me as a US taxpayer.  But what a can of worms this opens!  Randy likes the ruling and sees significant implications:

This case and the fact that it was uphold on an appeal sets in place a basis for many frequent flyers to have their use of miles as payment actually amount to something. Now, whether this case will hold up in situations whereby a person can claim a tax deduction when using their miles for a charity or other cause remains to be seen.

But I’m a glass half empty kinda guy. I see that the potential to tax miles received from business travel (which arent’ a rebate, as the recipient hasn’t paid for them) if those miles are valued as though they were cash. I see the potential to tax miles if an employer gives an employee a trip on points earned with the company credit card. So I’m not nearly so enthusiastic. I have come to like and live within the status quo, changes in tax treatment of miles — even up North — are disconcerting to me.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I’m with you, Gary, I see this as a negative. Any court treating miles as cash equivalent (and therefore worthy of a tax deduction) opens the door for govts to tax the redemption/receipt of miles in the first place.

  2. Also agree with Gary. I won a contest from American Airlines in which I won 25,000 miles. AA valued the miles at $600! Of which I had to claim on my taxes as a prize. They vastly overvalued the miles (at least assuming I redeemed for an economy ticket). Taxing miles would be a huge negative.

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