Chase to Report Credit Card Benefits as Taxable
It is well-documented that “IRS” is the most feared three-letter acronym in the English language, at least after “STD.” Well, in more bad news for miles junkies this week, Chase appears to be considering a policy of reporting airline and points benefits associated with its credit cards as taxable income. Going even further than Citibank, which has in the past only reported miles related to checking accounts, Chase plans to send cardholders 1099 forms reporting virtually all card perks.
According to our source at Chase, “Every benefit is on the table to be reported as miscellaneous taxable income.” As an example, she noted that Ultimate Rewards points would likely be valued at thirty cents a piece because they are “fantastically flexible.” At this rate, the 50,000 point sign up bonus associated with the Sapphire Preferred card would be treated as $15,000 of income, and this does not even take into account the metal inside of the card, which will reportedly be valued around $28.
Perks associated with cards like the United MileagePlus Explorer Card such as checking a bag free and priority boarding are said to be valued at $645 and $925, respectively. Hotel cards will not get a pass, and Chase has decided to value the two free nights given away with its Hyatt card at $800 each because they can be used at the chain’s premium Park Hyatt properties.
When we expressed concern regarding these valuations, our source became defensive and explained that the numbers were reached through a complicated series of algorithms taking full account of the “realness” and “awesomeness” of the card benefits. While we here at Points Envy are thankfully not tax professionals (and have not actually paid taxes in years), we believe cardholders will be well within their rights to contest these amounts. We will keep a close watch on this unfortunate development and pass along any updates.