What to know about the American Express Membership Rewards excise tax

You are planning to move American Express Membership Rewards Point to an American airline? You may want to take advantage this workaround to transfer your Amex points to the Alaska Airlines Miles Program.

Note: You will have to pay a special consumption tax clearing fee. Here’s an explanation of how it works — and how to book domestic flights without paying this annoying fee.

What is excise tax and how does Amex calculate it?

The IRS defines an excise tax as a tax “on certain goods, services, and activities” – including certain transactions related to customer loyalty programs. You’ll often see them when purchasing points or miles directly from airlines, but they also work for Transferable points currency.

To calculate these taxes, American Express applies an “excise tax offset fee” when Transfer member reward points into a US airline’s loyalty program. Here’s how it’s described on Amex’s website:

“Each time you transfer points to a US airline frequent flyer program, your linked Card account will be charged an excise tax offset fee of $0.0006 per point (with a minimum fee maximum of $99). We charge this fee to offset the federal excise tax we pay when transferring points.”

As noted, this fee only applies to frequent flyer programs of US airlines. For Amex, this includes three programs:

Transportation to hotel partners and international airline programs will not be subject to this fee.

Related: American Express Membership Rewards transfer partner: Maximize your points

What does the excise tax offset fee look like?

When switching to a US frequent flyer program like Delta SkyMiles, Amex will prompt you for an excise tax offset fee.

In this example, you would pay a $30 fee to transfer 50,000 Amex points to Delta SkyMiles. You can also use your points to cover excise tax offset fees, but this isn’t a good use of your hard-earned rewards. By using 6,000 points to avoid the $30 fee, you’ll redeem each point for just half a cent each or a quarter of a point in our September 2024 valuation Amex points.

How can you avoid fees

As noted above, this fee is only charged for transfers to Amex’s three transfer partners. If you convert your Membership Rewards points to your hotel program currency, this will not apply. But most importantly, there’s also no charge for switching to international airline loyalty programs — and you can often use these to book domestic flights.

For example, if a prize is available, you can use it Virgin Atlantic Flying Club points on Delta Air Lines and Hawaiian Airlines. Additionally, JetBlue TrueBlue is a revenue-based loyalty program, so you might want to crunch the numbers and see if booking those flights through American Express Travel makes more sense. After all, those are considered the same as paid tickets and are therefore eligible for rewards.

Finally, it’s worth noting that no other transfer points program charges a fee for these transfers. If you have points with Citi ThankYou Rewards or Chasing the ultimate reward for example, you can transfer them to JetBlue without paying any additional fees.

Bottom line

For the most part, transferring Amex points to Delta, Hawaiian, or JetBlue doesn’t make much sense, especially since there’s an excise tax on these transfers. Additionally, there are no programs that offer spectacular value for your rewards.

We recommend only doing so when you’re running low on a certain redemption amount and want to add just a few thousand points or miles to your account — or transfer your Amex points to Hawaiian Airlines and then to Alaska Airlines . Even then, remember to pay the excise tax clearing fee by American Expressbecause redeeming Amex points this way is a terrible value.

Otherwise, stick with loyalty or international programs as they’re the best way to maximize your Membership Rewards points.

Related: How to redeem American Express Membership Rewards for maximum value