Are There Some Overlooked Pay Yourself Back Tax Benefits?

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Are There Some Overlooked Pay Yourself Back Tax Benefits?

Something recently dawned on me with Chase Pay Yourself Back. There may be a tax benefit that comes along with going this route versus using the points directly for travel. I will say that I am not a tax professional and that this is for entertainment purposes only. This is also something that will not be beneficial for most people but could be a nice bonus for people like me. The unintended tax benefit is for people that are able to write off their travel expenses for work.

What Is Chase Pay Yourself Back?

Before we get ahead of ourselves let’s do a quick overview of the Pay Yourself Back program.

With the Pay Yourself BackSM tool, your Ultimate Rewards® points are worth 50% more (with the Sapphire Reserve) when you redeem them for statement credits against purchases in our current categories: grocery stores, dining (including restaurants, takeout, and eligible delivery services), and home improvement stores such as Home Depot® and Lowes®. Just choose an eligible purchase you made in the past 90 days, apply points for all or part of the purchase, and you’ll get a statement credit.

It essentially allows you to use your Ultimate Rewards points as statement credits for certain purchases at a higher rate.  Usually cash back is only worth 1 cent per point but with this feature it is worth 1.5 cents per point (with the CSR, it is 1.25 cents per point with an Ink card or Sapphire Preferred). I shared my thoughts on why people should consider doing this and it is also something I may use to help my college funding plan.

Maxing Out Your Tax Write Offs

Because of my work I am able to write off pretty much anything related to travel. If you ever have to travel for work you may be able to do something similar as well.

Even though I can write off travel for work I will still often book my travel with points. Just because I can write it off doesn’t mean that I can afford to pay cash for it to max out my write offs. When I do use points to pay for travel I am not able to write off that expense since it isn’t a real cost that I incurred.

Another perk of points is that points earned have never been taxed by the IRS. Miles & points have always been considered a rebate on your spend and not actual income. They do not tax welcome offers either, but they have started taxing referral bonuses.

My thinking goes like this, what if instead of booking my Southwest flight or Hyatt hotel with points I used Pay Yourself Back funds to make the payment? The redemption rates are practically the same, according to our point valuations guide. Heck, I may actually come out ahead by earning points on the flight or from the hotel stay as well as the credit card points for the purchase. This means I would still be able to use my points to pay for travel but I would get to write it off too.

In the past you could also get 1.5 cents per point booking travel via the Chase travel portal. While I would still earn points and other perks on flights you got nothing on hotels. But by going this route I was not able to write off the expense, even though the redemption is similar, because no cost was incurred.

Final Thoughts

This is something I have been thinking about for a little while now. I had considered not writing it up because I am not sure how many people it would help but I figured the thought exercise would be enjoyable to some.

You may be able to work this into your life even if you don’t think you can as well. If you resell gift cards maybe you will fly to an area to take advantage of a deal. Reselling gift cards is your business and you should be able to write off that travel on your returns against your reselling income. If you booked those flights with points directly that wouldn’t be an option. There are plenty of other ways to think outside the box a little bit here.

Next time you go to book work related travel consider if you should skip the points booking and pay cash. You only do this realizing that you still use your points as a way to “pay cash”. Going this route could keep some money in your pocket and keep some of it out of Uncle Sam’s pocket.

Once again I want to say that I am not a tax professional and that this was for entertainment purposes. Be sure to consult your tax professional before making any final decisions.

Mark Ostermann
Mark Ostermann is a father, husband and miles/points fanatic. He left the corporate world after starting a family in order to be a stay at home dad. Mark is constantly looking at ways to save money and stay within budget while also taking awesome vacations with his family. When he isn't caring for his family or taking a weekend trip, Mark is working towards his goal of visiting every Major League Baseball ballpark.

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4 COMMENTS

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4 COMMENTS

  1. This is not correct. The reimbursement is directly tied to the purchase so it is a reduction in cost of goods or service. So it is not tax deductible. Its like you never made the purchase so you cant claim it. Just like you cant claim points redemptions. Now, it will be much harder for irs to follow the trail but that does not make it a genuine writeoff

    • If it comes from your business credit card account then I would agree but since these are personal cards I am not sure if that is accurate. You are using the money to pay for groceries or restaurants etc. from everyday life. The money you saved is then directed towards a travel expense. The points are not directly tied to the travel. I think you are thinking they are.

  2. Has travel category been added to Pay yourself back. I thought it was home improvements, groceries and not some charitable contributions

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