A (not so) silly tax question - charitable donation I made

[freebird5825]

I went here first...but found nothing that covered this situation.
Publication 561 (4/2007), Determining the Value of Donated Property

Facts:
1. I had a balance of 92,679 airline miles with a commerical air carrier. I have the statement to prove that fact.
2. I donated my entire miles account balance to the "Miles of Hope" program in Dec 2010. I specified the American Red Cross as the recipient.
3. I received an acknowledgement email from the commercial carrier documenting my donation. There was no value stated for the 92,679 miles.

Questions:
1. Do these miles even qualify as something (property, intangible, ) I can claim as a charitable donation?
2. If so, how on earth do I figure out a value for my taxes (charitable donation) purposes?
3. Should I just benefit from the "feel good" aspect of the donation and don't bother with questions 1 and 2 ?

Have at it, tax gurus!

 

[MasterBlaster]

I would look at some airfare costs that 92k miles buys. ie. What is the best use of those FF miles in airfare savings. I would document those so as to have something in a potential audit.

Then I would deduct the cost of those foregone flights.

You have nothing to lose, at worst your deduction will be disallowed. Perhaps you'll have to explain your reasoning in a mail-audit.

I don't see any problem at all in this apprach

 

[MichaelB]

Sorry. You can't take a deduction for something you didn't pay for. You did a nice thing, though, so give yourself a nice big hug and kiss.

 

[MasterBlaster]

Sorry. You can't take a deduction for something you didn't pay for. You did a nice thing, though, so give yourself a nice big hug and kiss.

<EDIT> I did a search on this topic - Google - "Are frequent flyer miles deductable ?".

And evidently the IRS has ruled that donated FF miles are not deductable.

- sorry

I don't agree with that. The FF miles have an intrinsic value. And someone did pay for them via airfares aor credit card purchases.

I say deduct them.

 

[ziggy29]

I don't agree with that. The FF miles have an intrinsic value. And someone did pay for them via airfares aor credit card purchases.

I say deduct them.

I don't agree with this. I don't think you can deduct a gift made with value that was never taxed. If FF miles aren't taxable when you receive them, then neither should they be deductible when gifting them. It's like making a gift from a conventional IRA -- you don't write off the donation amount, you just never pay tax on the value you've given away.

 

[easysurfer]

Freebird~

Did a quick search on yahoo.

Are miles given to charity tax-deductible? - SmarterTravel.com

Might not be the answer you wanted...but might be correct

 

[freebird5825]

<EDIT> I did a search on this topic - Google - "Are frequent flyer miles deductable ?".

And evidently the IRS has ruled that donated FF miles are not deductable.

- sorry

I don't agree with that. The FF miles have an intrinsic value. And someone did pay for them via airfares aor credit card purchases.

I say deduct them.

There is another fact I forgot to mention...all these miles were awarded to me as a private citizen (not as an employee of the fed). I took a lot of "tag-along" trips with my LH. I paid for the fares with my own money. The miles were still valid for my own personal use when I donated them, i.e. they were not expired.

So basically they are an "award" as a result of purchases of airline tickets, on my own nickel.

This should prove to be an interesting discussion. Mr B (an accountant by trade before FIRE) tells me he doubts they will be deductible, but let's see what we can all find out.

 

[MichaelB]

<EDIT> I did a search on this topic - Google - "Are frequent flyer miles deductable ?".

And evidently the IRS has ruled that donated FF miles are not deductable.

- sorry

I don't agree with that. The FF miles have an intrinsic value. And someone did pay for them via airfares aor credit card purchases.

I say deduct them.

You didn't pay for the miles, you paid to travel. The miles are a reward that you are entitled to use. They have a market value - say around $.01 per mile - but because you have not paid for them they do not qualify for a charitable deduction.

If you want the deduction you need to convert the miles to money and donate the money.

 

[Texas Proud]

As being mentioned... you have no 'basis' in the miles, so you can not deduct anything...


Decided to take a look at the article... and they say the same thing...

"According to a spokesperson for United, "Frequent flyer miles are a reward for loyalty. They do not constitute property. And the IRS does not grant deductions for something you don't pay for.""


Think of it another way... say you receive a coupon in the mail for $10 off an item... and donate that coupon... and the charity uses it and saves money... did you give the charity anything you paid for? Nope.. sure, it would have been worth $10 if you used it... but you did not...

 

[freebird5825]

I will check back later...have to [-]try to[/-] go make myself look beautiful at the haircutting place.

If anyone has a citation from the IRS, please post it.

 

[ziggy29]

In general (per IRS publication 526), charitable contribution deductions are limited to the lesser of:

* The current market value of the donation;
* The "basis" of the asset being donated.

In the case of donated frequent flier miles (again, like donations directly from traditional IRAs) the "basis" is zero (i.e. you paid no taxes on the value of what is being donated), so the deduction is zero.

 

[kaneohe]

Freebird~

Did a quick search on yahoo.

Are miles given to charity tax-deductible? - SmarterTravel.com

Might not be the answer you wanted...but might be correct

many more here:
Google

even just reading the summaries from the various charities, it doesn't look hopeful

 

[MasterBlaster]

You didn't pay for the miles, you paid to travel. The miles are a reward that you are entitled to use. They have a market value - say around $.01 per mile - but because you have not paid for them they do not qualify for a charitable deduction.

If you want the deduction you need to convert the miles to money and donate the money.

Perhaps I should have displayed my edited post like this to make it more clear:

<EDIT> I did a search on this topic - Google - "Are frequent flyer miles deductable ?".

And evidently the IRS has ruled that donated FF miles are not deductable.

- sorry

[-]I don't agree with that. The FF miles have an intrinsic value. And someone did pay for them via airfares aor credit card purchases.

I say deduct them. [/-]

 

[bbbamI]

I don't know if they're deductible or not. It's hard to concentrate coz I can't get past MichaelB's avatar...

 

[travelover]

I don't know if they're deductible or not. It's hard to concentrate coz I can't get past MichaelB's avatar...

Certain things catch your eye

 

[MichaelB]

I don't know if they're deductible or not. It's hard to concentrate coz I can't get past MichaelB's avatar...

Thanks - but look who's talking. Anyway, two comments in 24 hours is enough - it's changed.

 

[bbbamI]

Thanks - but look who's talking. Anyway, two comments in 24 hours is enough - it's changed.

YouTube - Billy Joel "Just the way you are" Live 1977

 

[Rustic23]

From the Red Cross website on this subject.

he IRS currently recognizes the donation of frequent flyer points as a gift from the airline to the charitable organization, therefore miles donated to the Red Cross are not considered tax-deductible by the individual donor. For further information we suggest that you consult IRS Publication 526 and/or your personal tax advisor.

 

[kaneohe]

fbxxxx........thanks for posting this (not so silly after all) question. I had the wrong impression too. I had trouble reconciling the fact that it is often recommended that you donate appreciated stock to charity so you can take the deduction at fair market value and also not pay taxes on the gain with other comments here that you can't deduct at fair market value. After reading pub 526, it appears that you sometimes can and sometimes cannot........it seems to depend on whether the donation is a capital asset or not.....so you get to do it for stocks but not for FF miles because apparently they aren't capital assets
(like stocks in an IRA are not)......so perhaps there is some method to the madness after all. I learned something thanks to you.

 

[SecondCor521]

Here's another thought/question:

I believe one can deduct mileage related to charitable contributions. So I deduct the mileage driving back and forth to the Red Cross for my platelet donations, even though I don't deduct the platelets (zero basis!).

It's a stretch, but perhaps OP can deduct the mileage driving from her home to/from the airport, since it was related to her charitable contribution of miles in the sense that she had to drive to/from the airport in order to accumulate the miles in order to donate them.

2Cor521

 

[travelover]

Freebird, I say go ahead and deduct it. If the IRS asks you for a character witness, I will testify that you are indeed a character!

 

[freebird5825]

From the Red Cross website on this subject.

he IRS currently recognizes the donation of frequent flyer points as a gift from the airline to the charitable organization, therefore miles donated to the Red Cross are not considered tax-deductible by the individual donor. For further information we suggest that you consult IRS Publication 526 and/or your personal tax advisor.

Now why didn't I think to look there...

Thanks everyone for the answers and commentary.

I'm still surprised the IRS site didn't specificaly address this topic, at least in terms of my lack of success in using their search engine.

I may have a few more [-]not so[/-] dumb questions about taxes.

If anyone else also have some questions, feel free to post them here.

 

[Arnie]

I would tend to agree they would not be deductible.

But just for fun, a couple of questions crossed my mind while reading the responses in this thread.

Can I take a donation for that sweater I got from aunt Hilda for Christmas if I donate it to the Salvation Army?

What about if I donate the cash rebate I got from my credit card reward program?

 

[pb4uski]

I would tend to agree they would not be deductible.

But just for fun, a couple of questions crossed my mind while reading the responses in this thread.

Can I take a donation for that sweater I got from aunt Hilda for Christmas if I donate it to the Salvation Army?

What about if I donate the cash rebate I got from my credit card reward program?

Agree that donated miles are not deductible. Sort of like that the value of your time working for a charity is not deductible either.

The sweater yes (for its "value"), the cash of course.

Are the rules inconsistent? Yes.

Do you really want to have to claim the value of miles from the air carrier, the gift from Aunt Hilda and the cash rebate from the credit card reward program as income so that everything will make sense? I suspect not.

 

[MichaelB]

I would tend to agree they would not be deductible.

But just for fun, a couple of questions crossed my mind while reading the responses in this thread.

Can I take a donation for that sweater I got from aunt Hilda for Christmas if I donate it to the Salvation Army?

What about if I donate the cash rebate I got from my credit card reward program?

You cannot deduct the sweater because you have no cost basis.

You can deduct the cash gift because the contribution you make is unrelated to the rebate you receive - they only coincide in amount.