So I’ll be flying to Australia in the coming months on business. Over the years, I’ve been accumulating a lot of frequent flier miles with Qantas.
This upcoming trip got me thinking. Is there a way my corporation can take a tax deduction if I use my frequent flier miles to book this trip?
Yes, I can take a tax deduction by selling the free ticket to my company.
Here’s how it’s done.
Rather than purchasing a ticket, I trade in my personal air miles with Qantas to book my ticket.
Next, I shop around to determine what the fair market value of the ticket is. One method I can use to determine its value is the “replacement value.” In this situation, I would use a nationally recognized airfare reservation tool, such as those provided by Qantas, Expedia or Kayak, to value the fare for the exact trip I am booking through my miles. Now, I’ll be performing this valuation based on traveling last minute (no surprise) in the same class of service I booked using my miles.
Once I’ve determined the value, I would use that value as the exact reimbursement from my company to me for the use of my miles to book the ticket. In essence, I’ve sold the ticket to my company, which will realize a tax deduction for the expense, while at the same time I receive a tax free cash reimbursement from my company.