Is compensation for things like denied boarding taxable?
Thread Starter
Joined: Jan 2008
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From: US/EU
Is compensation for things like denied boarding taxable?
Any accountants out there who could answer this question? Specifically, I'm referring to compensation received from an airline for things like denied boarding or missed connections.
On the surface, it would seem complicated. For example, I pay US income tax, and last year received compensation for denied boarding for a cancelled US-bound flight originating in Amsterdam. I received a voucher from KLM worth 400 euro for a non-refundable flight in the future, but I could also have exchanged that for 300 euro cash. I have also received substantial cash compensation for excessive delays and missed connections in France.
Does this constitute income? How much? And under which country's jurisdiction might it be taxable?
I've never heard of anyone claiming such compensation as income, and am just wondering if that's a matter of law or just habit.
On the surface, it would seem complicated. For example, I pay US income tax, and last year received compensation for denied boarding for a cancelled US-bound flight originating in Amsterdam. I received a voucher from KLM worth 400 euro for a non-refundable flight in the future, but I could also have exchanged that for 300 euro cash. I have also received substantial cash compensation for excessive delays and missed connections in France.
Does this constitute income? How much? And under which country's jurisdiction might it be taxable?
I've never heard of anyone claiming such compensation as income, and am just wondering if that's a matter of law or just habit.
Joined: Apr 2010
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From: London
In th UK it is not taxable but if you pay US income tax then they tax on your wide world income
https://www.irs.gov/pub/irs-wd/0605011.pdf deals with the tax treatment applying to the airlines payment/vouchers
https://www.tripadvisor.co.uk/ShowTo...ir_Travel.html
has an interesting discussion which suggests that you don't pay tax if it's less than USD 1000
https://www.irs.gov/pub/irs-wd/0605011.pdf deals with the tax treatment applying to the airlines payment/vouchers
https://www.tripadvisor.co.uk/ShowTo...ir_Travel.html
has an interesting discussion which suggests that you don't pay tax if it's less than USD 1000
Thread Starter
Joined: Jan 2008
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From: US/EU
Heathrow Harry -- The first link you offered applies to the airlines and how they account for vouchers, not passengers' tax consequences. The second link seems to be talking about sales tax on a ticket bought using a voucher.
What I am asking about is whether or not the value of the voucher I receive would be considered income by the US tax authority and, therefore, taxed. These vouchers have an actual cash value they can be converted to, less than the face value of the voucher, or actual cash was received as compensation in lieu of a voucher.
What I am asking about is whether or not the value of the voucher I receive would be considered income by the US tax authority and, therefore, taxed. These vouchers have an actual cash value they can be converted to, less than the face value of the voucher, or actual cash was received as compensation in lieu of a voucher.
Joined: Apr 2010
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From: London
Sorry Mark - I thought it was clear that tthe first link applied to the AIRLINES - but it does have some insights into how the IRS see vouchers/ compensation in general
https://www.irs.gov/publications/p525/ar02.html seems to list all sorts of thing you might have as income but they don't list repayments from airlines. A google search doesn't bring up anything either
my guess is that it's such a small amount overall it hasn't come to their notice - they might try and get you under "any other Income" but unless you make a fuss I doubt they'll care - it can't be a vast amount anyway?
https://www.irs.gov/publications/p525/ar02.html seems to list all sorts of thing you might have as income but they don't list repayments from airlines. A google search doesn't bring up anything either
my guess is that it's such a small amount overall it hasn't come to their notice - they might try and get you under "any other Income" but unless you make a fuss I doubt they'll care - it can't be a vast amount anyway?
Joined: Nov 2005
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From: Potomac Heights
It would depend on whether you bought the ticket for leisure or for business. If for business, you would have deducted the ticket's cost from your income. In that case, if you received compensation or a refund, you would have to add that back into your income to be taxed. But if the trip was for leisure and the ticket's cost was not deductible, any compensation you receive would just be like a reduction in the price you paid for the ticket. Not taxable.
I'm not a tax accountant, but that's how I would look at it.
I'm not a tax accountant, but that's how I would look at it.
Thread Starter
Joined: Jan 2008
Posts: 694
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From: US/EU
Heathrow Harry: "it can't be a vast amount anyway?"
On my last trip back to the US West Coast, I received 1600 euros in compensation for three separate incidents, two delays and a denied boarding, significantly more than I paid for my ticket!
On my last trip back to the US West Coast, I received 1600 euros in compensation for three separate incidents, two delays and a denied boarding, significantly more than I paid for my ticket!
