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Do Canadians Owe Taxes on Credit Card Loyalty Points? Possibly.

Do Canadian owe taxes on credit card loyalty points? The quick answer is sometimes yes, sometimes no. If the points were collected or earned from personal use it shouldn’t be a problem. If you’re collecting points from work i.e. your employer allows you to collect points for company travel, and then reimburses you the cost of the travel, the Canada Revenue Agency states the following:

“Your employees may collect loyalty points, such as frequent flyer points or air miles, on their personal credit cards when travelling on business trips, even though you reimburse them for the amounts they spend. Usually, these points can be exchanged or cashed in for rewards (goods or services, including gift cards and certificates).

Your employees do not have to include in their income the value of the rewards they received or enjoyed from the points they collect on these business trips, unless any of the following applies:

The points are converted to cash. The plan or arrangement between you and the employee seems to be a form of additional remuneration. The plan or arrangement is a form of tax avoidance.

If any of the conditions above are met,the employee has to declare the fair market value of any personal rewards he or she received on an income tax and benefit return.

Note

If you control the points (such as when an employee uses a company credit card,you have to report on their T4 slip the fair market value of any personal rewards he or she received from redeeming the points.

Include any GST/HST that applies in the value of this benefit.”

Interpret the above as follows:

1. Normal travel is no problem. Just don’t then go selling your 120,000 Aeroplan points to someone else. Although this does raise the question of how the CRA treats cash-back cards?

2. Your employer can’t say “use your card to make this $30,000 purchase” consider that a $600 bonus…wink, wink, nod,nod.

3. Your employer can’t give you a 20,000 points as a bonus, with it being taxable

4. Same as #2, except the goal is to provide a $600 tax-free benefit to the employee

Of course we would always say, speak to your accountant. Anyone have any personal experience or expertise related to the topic?

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