Law Advisor Blog


Do Business Credit Card Rewards Belong to the Employee or the Business and are they Taxable?

Garth E. Beall

We sometimes get questions regarding rewards miles and other promotion rewards associated with business credit cards.  The biggest questions are, who owns the miles, can I use them for personal use and, if I do, is it taxable?

Who owns business credit card rewards or frequent flyer miles.  The short answer is that the issuer’s reward terms control.  Most issuers take the position that no one owns rewards miles or other promotional rewards.  The card holder generally has the right to claim rewards when available, including to transfer (subject to program rules) rewards to personal use.  Credit card rewards are a contract right, subject to the terms of the applicable program which can generally we cancelled at any time.  American Express, in its terms and conditions last updated March 2022, says that their rewards program can be cancelled on 90 days’ notice and any rewards not used by then will expire. 
Can I use frequent flyer miles and rewards for personal use.  Probably.  The answer to this question depends as much on the employer as on the terms and conditions of the card.  While most credit card companies require business cards to be used solely or primarily for business purposes, they typically do not restrict the use of rewards to business purposes.  Some companies restrict the personal use of rewards by employees or prohibit them.  Others do not.  It is something that employers may consider addressing in their employee handbook.

Is personal use of business credit card rewards or miles taxable.  Generally not, with caveats.  The IRS answered the simple part of this question with an Announcement issued in 2002.  The IRS announced that it would “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”.  While clear on its face, it is subject to caveats.  The announcement also states that it “does not apply to travel or other promotional benefits that are converted to cash, to compensation that is paid in the form of travel or other promotional benefits”.  Other circumstances where benefits are used for tax avoidance purposes are also excluded.  So no problem with using miles from your company card to book a trip to Florida but redeeming them for a gift cards is going to be taxable.

Disclaimer:   The opinions raised in this blog are solely those of the author.  The information contained in this blog is general in nature and is not offered, and cannot be considered as legal advice for any particular situation.