Frequent Self-Business Travel: Cash or Points?

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sungchiahao

Level 2 Member
Hi All,
I am getting into a work situation where I need to fly 2 round trips a month from PHX to SEA. No need to stay at hotels or rent car, just airfare. I would like to bounce ideas off of the forum as to how to maximize this situation.
  1. Pay Cash, and get deduction on tax filing - What airline to specialize? I see AA/UA,AS, WN, and DL as direct flights, and what reward program to credit?
    • Pros: gain miles on airline; gain elite status
    • Cons: pay upfront
  2. Use points - Probably using Avios or RR points
    • Pros: Redeem miles now and prevent future devaluation impact
    • Cons: Can't gain miles; Cannot gain elite status
Thank you.
 
Matt

Matt

Administrator
Staff member
sungchiahao said:
Hi All,
I am getting into a work situation where I need to fly 2 round trips a month from PHX to SEA. No need to stay at hotels or rent car, just airfare. I would like to bounce ideas off of the forum as to how to maximize this situation.
  1. Pay Cash, and get deduction on tax filing - What airline to specialize? I see AA/UA,AS, WN, and DL as direct flights, and what reward program to credit?
    • Pros: gain miles on airline; gain elite status
    • Cons: pay upfront
  2. Use points - Probably using Avios or RR points
    • Pros: Redeem miles now and prevent future devaluation impact
    • Cons: Can't gain miles; Cannot gain elite status
Thank you.
Click to expand...
Depends on how much money you've got...

You want to get the maximum deductions from your business, but you don't want that to be due to paying for flights if you don't have enough income to pay for a solid retirement plan and other things. If you are bootstrapping and working your way up I'd recommend miles all day long so you free up cashflow for important business investments, such as office space and tech solutions.

If your business is thriving and you aren't cutting too many corners on your infrastructure and employee benefits, that's when it has enough 'fat' for it to afford to pay cash.
 
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SanDiego1K

Level 2 Member
Matt has captured it well. We own our own business. I'm very mindful of cash flow in making a determination as to whether my husband should pay for flights and hotels or use points. In general, it's a mature business and should carry itself in covering expenses. However, I'm always thinking as to whether I want the business to pay for travel or to have cash available to the family. I'm quick to use points to cover hotels. My husband travels to agricultural areas where there are lots of Holiday Inn Expresses, Hampton Inns and the like. Our points pot is generally deep enough that it is cost effective to spend points instead of money.

In the OPs case, Avios are a stunning deal for short haul flights. And if you book with Avios and have to cancel, your only fee is the modest security fee. I'd book with Avios as far ahead as I had visibility and could find availability.
 
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sungchiahao

Level 2 Member
Thanks! I'll look into Avios. I actually don't have any Avios, but I have MR to transfer into it.

Should I pay for flights, which rewards program is best to credit the flights?

Thinking ahead, I'm thinking also using this as an opportunity to get the southwest CP in Jan 2016 to get cheap flight for my family if they wanted to travel with me.
 
Matt

Matt

Administrator
Staff member
sungchiahao said:
Thanks! I'll look into Avios. I actually don't have any Avios, but I have MR to transfer into it.

Should I pay for flights, which rewards program is best to credit the flights?

Thinking ahead, I'm thinking also using this as an opportunity to get the southwest CP in Jan 2016 to get cheap flight for my family if they wanted to travel with me.
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Avios txf from MR is about to devalue I believe? Might want to act fast.
 
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SanDiego1K

Level 2 Member
Be aware that as of Oct 1, MR will transfer to BA at a lower level, I think 1 MR to .8 Avios. Today you can transfer at 1:1.

I'd look at both AA and AS and determine between them where to credit your miles. They are both decent programs. Personally, I'd choose AS. And the Southwest CP were be very smart to consider for companion travel.
 
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BuddyFunJet

Level 2 Member
sungchiahao said:
Thanks! I'll look into Avios. I actually don't have any Avios, but I have MR to transfer into it.
Click to expand...
You might look at the BA CC with the 100k bonus to start your Avios balance. 7500 avios OW and the ability to cancel for only the taxes works out to a deal. I'd also look at WN for when there isn't award availability with Avios.
 
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janetdoe

Level 2 Member
The real question, in my mind, is how predictable the trips are. If you know you will always need to go on the 2nd and 4th Wednesday of the month, you can book several months worth of tickets when there is a sale. If you are going to need to buy tickets within a few days of travel, miles will often be cheaper.

Depending on your accounting, if you are pulling from your personal stash of miles, it MAY be possible to 'sell' miles to yourself from the business and thus get the deduction anyways. I know a guy who will buy chunks of 100k miles from frequent flyer programs when they go on sale, and then he uses the miles to book longhaul F travel for less than the cost of coach. His CFO loves the fact that there is a fixed, documented cost for the miles and he submits them as expenses and gets reimbursed. So there are probably legitimate accounting options and methods to value the amount of your personal assets (miles) you are expending in lieu of the business's money. The real problem is getting an objective value that will stand up to IRS scrutiny if questioned. If you earn your miles through a program like UR, MR, TYP where you can use the miles for exactly $0.01 statement credit, I would guess that would give you a low but concrete value - you know that when you spend 7500 Avios on a ticket, you could have had a $75 statement credit. Of course get a real accountant's opinion.

Personally, I would credit to Alaska. That will give you flexibility to fly AA, DL, or AS, whichever is cheapest, while crediting to your primary elite program.

Also, do not underestimate the benefits of status. 24 round-trips per year at 1100 miles each way is 48 segments, or 52k miles, which gets you decent status perks on AA (Platinum) and AS (MVP Gold). Besides double miles on all your flights, being able to book a cheap redeye (or book an award when the redeye is the only flight with award availability), knowing you can standby with high priority or even free confirmed change to a noon flight on the day of travel, can end up being pretty valuable. Complimentary upgrades and free extra legroom seats are also pretty nice.
 
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Hanaleiradio

Level 2 Member
--Re: @janetdoe's idea of buying miles from yourself: about 15 years ago my accountant told me that it was not worth the risk, no matter the basis one used for determining value of miles, because it was not an arms length transaction. She was sure that the IRS would not be happy in event of an audit, which I had had within previous few years and therefore was subject to a repeat. She had no problem with counting cost of buying miles from airlines, or even from brokers, as @Jandetdoe's friend does. This was before the time of Thank You points. My guess is that you could buy tickets with Thank You points and deduct cost of ticket, since you can print out a receipt which shows cost of ticket--but would want a CPA to bless it first.
--If you can include the cost of airfare into the costs you pass along to the client, then by all means buy the tickets! Billing "phantom airfare" to clients that you actually used miles for is a very bad idea, on several levels. Passing along the cost of tickets bought with Thank You points is more of a gray area.
--If you are going to be flying the route regularly, then you will quickly realize the value of nonstops. Flying Southwest would require a connection, most likely at MDW. The more connections, the more stuff can happen that leads to delays, mixed connections, etc--and stuff already happens far too often as it is. There are lots of mixed connections due to weather at MDW.
--I second @janetdoe's advice to not underestimate the value of status. On American, Gold is relatively worthless, other than getting you into MCE, which IS valuable on long hauls. But Platinum provides a large amount of flexibility for free or low cost, plus the 100% premium on miles flown lets you rack up a lot of miles quickly. Also, when stuff happens American definitely takes much better care of their Platinums and Ex-Plats than everyone else. Coupled with the ease of picking up AA miles or Thank You points (which can be used to buy tickets on AA at rate of 1.6 cents/point) via credit card, you could pile up a very nice stash of AA miles in a year.
 
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