For those who’re sitting on a pile of journey or bank card rewards with no fast journey plans, donating them to a charity is a straightforward strategy to have a constructive affect. And it is a widespread strategy 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 should 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 potential. 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 way 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 might obtain much less worth on your donation than you’d suppose, whereas additionally making it onerous to check the worth of a donation with the worth of different choices for redeeming your factors.
Greatest Western Rewards is likely 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 a degree a worth of 0.4 cent every. NerdWallet values Greatest Western factors at 0.6 cent apiece, so you’ll 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 Inside Income Service (IRS) doesn’t depend factors and miles as a supply of earnings, so should you donate them, you’ll be able to’t deduct the money worth of your reward. This lack of favorable tax therapy for the buyer mixed with the unsure worth you’ll usually obtain for miles and factors donations ought to have you ever no less than think about different avenues on your philanthropic endeavors.
Take into account that this downside solely issues for taxpayers who itemize deductions on their earnings tax returns. For those who’re like most individuals and take the usual deduction as a substitute of itemizing, you would not be capable of 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 must donate no less than 2,000 Southwest Rapid Rewards factors for a donation to the Make-A-Want Basis. That minimal quantity makes it harder to donate factors that could be accumulating mud in your loyalty account.
Methods to make your donation go additional
Donate to a corporation that books journey with miles
To maximise the worth of your donation, think about a charity that books journey straight together with your miles or factors somewhat than donating straight by way 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 a substitute 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 electronic 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 information essential to stretch the worth of each level or mile, guaranteeing donations go so far as potential,” Stouffer mentioned. “Even should you aren’t in a position to reap any tax benefits of donating your factors, no less than you’ll know they made the most important potential affect.”
Use money again as a substitute
Direct money donations assist keep away from the downsides of donating miles and factors. When you’ve got a bank card that earns cash back, or should you earn money rewards by way of a shopping portal like TopCashBack or Rakuten, think about cashing out and donating these rewards as a substitute of your miles and factors.
With a money donation, you’ll know the precise worth a charity will obtain out of your donation and sure 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 typically incentivize charitable giving by providing bonus factors on your money donations. For instance, American Airways gives 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 remember 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 way of donations at 3 cents every. So should you donate $100 and obtain 1,000 AAdvantage miles, American values these miles at $30. You’ll obtain a tax kind declaring these rewards as $30 in earnings, supplying you with a qualifying tax deduction of $70.
If 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 must pay taxes on these factors, it could nonetheless be a giant win on your future journey plans.
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The article Ought to You Donate Your Factors and Miles to Charity? initially appeared on NerdWallet.
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