When you’re sitting on a pile of journey or bank card rewards with no instant journey plans, donating them to a charity is a straightforward approach to have a constructive affect. And it is a widespread approach to give: In 2021, Alaska Airlines Mileage Plan members donated round 94 million miles to charities at an approximate money worth of $2.6 million, in keeping with the airline.
Past the social advantages, miles donations additionally qualify as exercise in your loyalty account and may stop the remainder of your rewards from expiring.
However in case you’re within the behavior of maximizing factors and miles, you may also wish to stretch the worth of your charitable donations so far as doable. And by that measure, some strategies of donating factors and miles fall brief.
Right here’s what to contemplate earlier than donating your miles and points.
The downsides of donating factors and miles
Charity may obtain much less worth in your rewards
Many loyalty applications make it simple to redeem your factors and miles for a donation instantly by their rewards portals. However some portals — particularly these from airline and lodge applications — don’t publish the money worth a charity will obtain in your miles or factors. Meaning the charity could obtain much less worth in your donation than you’d suppose, whereas additionally making it arduous to match the worth of a donation with the worth of different choices for redeeming your factors.
Finest Western Rewards is likely one of the few loyalty applications that publishes a money worth for charitable factors donations. The charity will obtain $2 for each 500 factors you donate, for some extent a worth of 0.4 cent every. NerdWallet values Finest Western factors at 0.6 cent apiece, so you’ll obtain 33% much less worth in your donation relative to utilizing them for a lodge keep.
You received’t get a tax deduction
Typically, the Inside Income Service (IRS) doesn’t depend factors and miles as a supply of earnings, so in case you donate them, you possibly can’t deduct the money worth of your reward. This lack of favorable tax therapy for the patron mixed with the unsure worth you’ll typically obtain for miles and factors donations ought to have you ever at the very least contemplate different avenues in your philanthropic endeavors.
Remember the fact that this downside solely issues for taxpayers who itemize deductions on their earnings tax returns. When you’re like most individuals and take the usual deduction as an alternative of itemizing, you would not be capable of get a charitable tax deduction from any donation.
You won’t meet the donation minimums
Some rewards applications have a minimal donation quantity for choose charities. For instance, you’d must donate at the very least 2,000 Southwest Rapid Rewards factors for a donation to the Make-A-Want Basis. That minimal quantity makes it harder to donate factors which may be gathering mud in your loyalty account.
make your donation go additional
Donate to a corporation that books journey with miles
To maximise the worth of your donation, contemplate a charity that books journey instantly together with your miles or factors quite than donating instantly by your loyalty program’s portal.
For instance, Miles4Migrants makes use of donated airline miles and bank card factors to instantly ebook award journey for refugees and asylum seekers.
“As an alternative of maximizing factors and miles to ebook a dream journey, we do it to assist refugees attain protected new beginnings,” mentioned Patrick Stouffer, partnerships supervisor at Miles4Migrants, in an e-mail.
Miles4Migrants has redeemed over 775 million donated miles in pursuit of their mission, with a money worth of over $17 million. That experience permits them to get extra worth out of each donation.
“Our workforce has the specialised data essential to stretch the worth of each level or mile, guaranteeing donations go so far as doable,” Stouffer mentioned. “Even in case you aren’t capable of reap any tax benefits of donating your factors, at the very least you’ll know they made the most important doable affect.”
Use money again as an alternative
Direct money donations assist keep away from the downsides of donating miles and factors. When you have a bank card that earns cash back, or in case you earn money rewards by a shopping portal like TopCashBack or Rakuten, contemplate cashing out and donating these rewards as an alternative of your miles and factors.
With a money donation, you’ll know the precise worth a charity will obtain out of your donation and certain qualify for a possible itemized deduction in your taxes. Some rewards applications make this course of easy and clear.
What about making charitable money donations to obtain bonus factors?
Journey rewards applications generally incentivize charitable giving by providing bonus factors in your money donations. For instance, American Airways affords 10 AAdvantage miles for each greenback members contribute to the charity Stand Up To Most cancers.
That additional incentive will be a person boon in your charitable donation. Simply bear in mind that any factors or miles you obtain from such promotions will scale back the tax deductibility of your contribution.
American Airways values these bonus miles you obtain by donations at 3 cents every. So in case you donate $100 and obtain 1,000 AAdvantage miles, American values these miles at $30. You’ll obtain a tax type declaring these rewards as $30 in earnings, supplying you with a qualifying tax deduction of $70.
Whenever you donate money and obtain bonus factors, the charity nonetheless receives your full donation and also you get a slug of factors. Whilst you’ll must pay taxes on these factors, it will possibly nonetheless be an enormous win in your future journey plans.
Extra From NerdWallet
The article Ought to You Donate Your Factors and Miles to Charity? initially appeared on NerdWallet.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
