That actually complicates it even more. You just used a main benefit of the card for personal use that you were planning on deducting the annual fee for as a business expense. Is it still primarily a business card now? Hard to say. The conservative answer is, no.
If you wanted to get down in the weeds, prorate the usage of the card to the AF. So,take the fraction of the $300 by the total annual charges of the card, say 50k. That’s $2.70 - I’d say not material.
Anecdotes - Plenty of people with company issued card may use them for personal expenses - they just have to be sure to pay these personal expenses personally.
What if instead of a 2% cash back card, I use a 3 point UR card? How much are UR worth? Are they worth whatever a blogger assigns in value which might be 1.5 or more cents each? Or are they worth 1 cents each since you can redeem them for cash of 1 cents? What if you never redeem them and they go unredeemed during that tax year, do you still have to reduce the value by what you could have redeemed them for? What if you wait 3 years to redeem them and the point value has reduced by then? Do you refile your 3 year old taxes and adjust for that?
How about instead of UR you get Frequent Flier points? How do you value those? At whatever inflated rate the airlines sell the points for? Or other valuation?
Assuming the only way the IRS can nail you is you use a cash back card, does that mean you’re far better off using a non-cash back card and a points-based card instead for business purchases?
All fair questions, and I think this is partially why the IRS hasn’t delved into this too deeply. Again, the conversation is practically academic because I don’t think most folks are adhering to these requirements, and I don’t think IRS is digging into them either.
For me, with something like a UR, I’d just assign a 1 cent/point value (their cash value) and report them when earned in a year. That’s plenty in good faith, and anyone going to this length is going to be more compliant than 99% of tax filers.
This is a great post, however, it requires carrying 4 CCs and remembering which one to use when.
I know this is not for everyone, but if you have $100K+ at BofA/Merrill, with the Premium Rewards card you get 3.5% on Travel/Dining and 2.625% on everything else. The mix may end up at about 2.75%. Is it worth the extra .25% to .50% for an extra three cards? I guess it depends on your spending.
If you have high enough spending, you might want to simply keep applying for new CCs until you meet the spend requirement and then get another one. This should yield >10%.
Good work BBB!
I look at it kind of differently. I optimize MS activities for category bonuses, but sort of err to convenience on normal daily spend rather than trying to optimize every transaction. MS dwarfs normal spend, so it doesn’t seem worth the trouble on small amounts.
On the other hand, I can almost always put normal spend towards some kind of card signup bonus well in excess of 3%.
With the growing universe of heavy hitters, I imagine it’s inevitable for the irs to rule on cash and non cash rebates in excess of purchase price. Someone really ought to take one for the team and ask for a private letter ruling on it.
I assume you’re referring to the Alliant card, but the 3% is only for the first year and then it drops to 2.5%. The $59 AF is negligible.
Still, applying for a new card every 3 months for the bonus is the highest yielding way to go. However, you’ll run into limits like Chase’s 5/24.
I figure with the 2.625% on BoA Premium Rewards (3.5% on restaurants and travel) I’m getting the best value of basically every card, so I’ve really slimmed down. I only have 5% cards in my wallet other than BoA Premium Rewards.
In spite of my threat mentioning several cards, I only carry 2 cards on me in my wallet: 2% everything cash back and whatever Prepaid Gift Debit Card I am running down that is an effective 4%+ cash back.
I have the AMEX Blue Cash card on Apple Pay on my phone that I use at the supermarket without needing to carry the card on me.
I keep My 5% Gas Card in my car.
My 5% Office Supply store card is either in my car or on my desk at home. The staples/office max deals only occur every 2 months or so, and I grab the card only as needed.
The CSR card gets used to book hotels, flights, and cars online. I don’t need to carry the card with me at any of the travel I’m booking, no one ever asks for it. It does work 3% for restaurants, but I rarely eat out, and when I do, I’ll grab it off my desk and swap it for the 2% card in my wallet for that day.
The 2% card in my wallet is primarily there for emergencies in case I have an unexpected thing I want to buy that exceeds whatever the prepaid card has left on it.
So ultimately, I’m carrying 2 cards only in my wallet for massive benefits.
How do you handle returns and the possible loss of the prepaid cards? Photocopy of the card at home?
I do this backwards. I carry more than 2 cards, but only 2 I use other than minimum spend cards. I carry Chase freedoms which is 5UR on rotating categories ( I value at 7.5% cash) and CSR which is 3UR (4.5%cash value to me) restaurants. Both of these are 1UR for other (1.5%). I see no value for keeping up with a 2% “other card” because most of my spend falls into the categories. I’d rather get an extra 2.5 -5.5% on the categories than an extra 0.5% on “other”. Other would have to be five times as much as the categories on CSR or used eleven times as much as the categories on the freedoms for it to make sense to displace one of them.
Often that “other” gets sorted to a minimum spend requirement card anyways so it’s not relevant anyways.
I have been trying to pare down my actual wallet lately by removing excess cards, but that’s an ongoing process. A challenge is store specific gift cards (which require a steep discount for me to end up with.)
I only carry one prepaid card at a time. If I lose it, I’m out a few hundred dollars max. No different than if I lost a wallet full of a few hundred dollars cash. I’ve never lost a wallet in my life, so I roll the dice and take the risk that I don’t lose it. I do have a spreadsheet at home with a list of all prepaid card numbers I buy, and where I bought them from, and the current balance. I do this to keep track to make sure cards with a few bucks left will get used.
Regarding returns, I tend to avoid buying stuff on the prepaid cards that I might return. In general, when I buy something, I know in advance that there’s either a 99% chance I will keep something or a 99% chance I’ll return something. I likely won’t return the avocado I bought from Wal Mart. There’s some things I know in advance I’m buying to try out and will return almost indefinitely, and those things will go on the actual CC in my wallet - doesn’t matter which, since I’m going to return it.
A handful of times I did do a return on a prepaid card and I just went into the box of used cards, found it, and used that. Was a minor hassle but it will very rare event for me.
Sounds like you have a really organized system BBB. If you lose the wallet with the prepaid card on it you can call, cancel the card and they can send you a new one.
Timing the start of the Chase Reserve pays off. My husband was able to get 3 separate travel bonuses plus the initial 100000 points. They just billed the second 450 so he will cancel the card now and try something else. It’s been a great experience.
It was based on calendar year at first. Changes to annual anniversary date.
Yes, that’s how you get 2 with 1AF, not Three. If you did it right in December you could get 2AFs and get one refunded just before 30 days (travel credits occurring days before the refund) and possibly get 3 travel credits.
My best guess is they got the card in late 2016, not Feb 2017. AF is a little slow showing because of statement date.
No, the AF shows up the on the first of the month following the application (or approval) date. If they got the card in late 2016, they have already been charged the AF twice. A December 2016 approval would have had the AF posted on 1/1/2017 and then on 1/1/2018.
The only way I think someone could possibly get 3 travel credits from 1xAF would assume really tight timings and be something like:
Apply Dec 2, 2016. Receive card Dec 6, 2016. Charge $300 travel/receive credit before - First statement posts December 15, 2016. First AF $450 posts 1/1/2017.
Charge $300 travel/credit before 12/15/2017. Charge another $300 travel/credit before 1/1/2018. Cancel or product change before 1/1/2018.
Alternately, get that last $300 travel credit before 2/1/2018. But then you have to get a refund of the 2nd AF (since less than 30 days), which Chase will do refunds (and prorations?) but I think there’s record that they track them and will ban you if you do it “too much”.
This would result in 3 travel credits and only 1 AF. I made up the dates in the example, I don’t know if it’s reasonable that they could have been that close together.
It’s now past 2/1/2018 so a late 2016 could not have had only 1 AF paid and 3 travel credits if it was just billed. I can’t think of another way one would get 3 travel credits out of 1 AF, but certainly I could have missed it and someone else can provide the scenario if it’s possible.
The change from calendar year to cardholder year made it where you only get 1 credit with first year’s fee (unless you use that week? before the next AF hits, after cardmember anniversary date and shipping time to receive the card plus time for the transaction to post, but before the 1st of the month) instead of the 2 that was fairly easy before.