Are miles given to charity tax-deductible?

Dear Tim,

I recently donated some of my airline miles to charity and am now wondering if that donation can be deducted for tax purposes. If so, what is their value?

Thanks,

GB in Florida

Dear GB,

Since the September 11 terrorist attack, many airlines and hotels have made it possible to donate miles and points toward relief efforts. And millions of miles and points have indeed been donated.

So the question of the tax-deductibility of miles donated to non-profit organizations is on the minds of many charity-minded frequent travelers.

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.”

In other words: If you didn’t purchase it on the front end, you can’t deduct it on the back end. That explains the apparent illogic of sanctioning deductions for donations of out-of-fashion clothing and obsolete computers to the Salvation Army, but not for frequent flyer miles donated to the Red Cross. That is, the former were purchased for money; the latter were awarded for loyalty.

For another perspective, we sought a ruling from tax advisor Eva Rosenberg, a.k.a. Your TaxMama. Her take:

“You can’t take a charitable contribution for frequent flyer miles because you’ve gotten them for free. You had no cost associated with them. And, although they might have substantial value (sometimes, as much as $5,000 or more worth of travel each year), the IRS has not required you to pay tax on the free miles you earn each year. And we do want to keep it this way, yes?

“Now, there may be one option that is deductible.

“Sometimes, people pay for their frequent flyer miles. If you have paid for those miles, you can deduct your cost as the value of your donation.”

So, summing up, frequent flyer miles donated to charity are not, under most circumstances, deductible. The exception: If you buy the miles, and are prepared to prove to the IRS that the donated miles were in fact purchased, then they can be deducted. In the latter case, the value of the miles would simply be their purchase price, typically between $0.02 and $0.025 each.

As a practical matter, since legitimately deductible miles are so rare, you risk triggering an audit by deducting them. So you have to ask yourself: Do I feel lucky (as well as generous)?

Tim Winship
Contributing Editor
SmarterTravel.com