In the event you’re sitting on a pile of journey or bank card rewards with no rapid journey plans, donating them to a charity is a simple approach to have a optimistic affect. And it is a in style 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 line with the airline.
Past the social advantages, miles donations additionally qualify as exercise in your loyalty account and may forestall the remainder of your rewards from expiring.
However when you’re within the behavior of maximizing factors and miles, you may additionally need to stretch the worth of your charitable donations so far as attainable. And by that measure, some strategies of donating factors and miles fall quick.
Right here’s what to think about earlier than donating your miles and points.
The downsides of donating factors and miles
Charity would possibly obtain much less worth on your rewards
Many loyalty packages make it straightforward to redeem your factors and miles for a donation straight by means of their rewards portals. However some portals — particularly these from airline and lodge packages — don’t publish the money worth a charity will obtain on your miles or factors. Meaning the charity could obtain much less worth on your donation than you’d assume, whereas additionally making it exhausting to match the worth of a donation with the worth of different choices for redeeming your factors.
Greatest Western Rewards is without doubt one of the few loyalty packages 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 Greatest Western factors at 0.6 cent apiece, so you’d obtain 33% much less worth on your donation relative to utilizing them for a lodge keep.
You gained’t get a tax deduction
Usually, the Inner Income Service (IRS) doesn’t rely factors and miles as a supply of earnings, so when you donate them, you may’t deduct the money worth of your reward. This lack of favorable tax remedy for the buyer mixed with the unsure worth you’ll usually obtain for miles and factors donations ought to have you ever at the least take into account different avenues on your philanthropic endeavors.
Needless to say this disadvantage solely issues for taxpayers who itemize deductions on their earnings tax returns. In the event you’re like most individuals and take the usual deduction as an alternative of itemizing, you would not be capable to get a charitable tax deduction from any donation.
You may not meet the donation minimums
Some rewards packages have a minimal donation quantity for choose charities. For instance, you’d need to donate at the least 2,000 Southwest Rapid Rewards factors for a donation to the Make-A-Want Basis. That minimal quantity makes it more durable to donate factors which may be gathering mud in your loyalty account.
Find out how to make your donation go additional
Donate to a corporation that books journey with miles
To maximise the worth of your donation, take into account a charity that books journey straight along with your miles or factors quite than donating straight by means of your loyalty program’s portal.
For instance, Miles4Migrants makes use of donated airline miles and bank card factors to straight e-book award journey for refugees and asylum seekers.
“As an alternative of maximizing factors and miles to e-book a dream journey, we do it to assist refugees attain secure 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 crew has the specialised data essential to stretch the worth of each level or mile, guaranteeing donations go so far as attainable,” Stouffer mentioned. “Even when you aren’t capable of reap any tax benefits of donating your factors, at the least you’ll know they made the most important attainable affect.”
Use money again as an alternative
Direct money donations assist keep away from the downsides of donating miles and factors. If in case you have a bank card that earns cash back, or when you earn money rewards by means of a shopping portal like TopCashBack or Rakuten, take into account 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 packages make this course of easy and clear.
What about making charitable money donations to obtain bonus factors?
Journey rewards packages generally incentivize charitable giving by providing bonus factors on your money donations. For instance, American Airways presents 10 AAdvantage miles for each greenback members contribute to the charity Stand Up To Most cancers.
That further incentive will be a person boon on 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 means of donations at 3 cents every. So when 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, providing you with a qualifying tax deduction of $70.
Once you donate money and obtain bonus factors, the charity nonetheless receives your full donation and also you get a slug of factors. When you’ll need to pay taxes on these factors, it will possibly nonetheless be a giant win on 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 writer and don’t essentially replicate these of Nasdaq, Inc.
