Tax on the miles? Why is this different than any signup bouns?
A signup bonus is considered a purchase rebate which is not a taxable event. A sweepstakes winning is always a taxable event and any prize won $600 or higher must be reported to the IRS.
99% people don't pay anywhere near 40% in total taxes.
94.7% of all statistics are made up on the spot.
And I'm not talking about total taxes, I'm talking about a marginal tax rate. Marginal means that any income earned on top will be subject to the highest rates. Adding a $15K prize adds $15K in income to your marginal tax level and can bump you into a higher tax bracket.
Care to back up your statement?
Take a single NY'er making a decent, but not extraordinary salary, say $85,000.
His marginal federal rate is 28%.
His marginal state rate is 6.85%
His marginal city rate is 3.65%
That's a 38.5% marginal rate. Any additional income earned will cost him 38.5%
Oh, and if he commits the sin of being self-employed then tack on another 15.3% in SE tax or half that if he's an employee.
In CA if you make more than $46K you owe the state alone 9.3% in income tax.
So what kind of tax breaks are we talking? Even if he donates a lot to charity and gets a deduction for that he still sill pay his marginal rate on additional earnings.