Three things to know about donating points and miles to charity
Charitable giving tends to be popular during the holidays, and this year the needs of many nonprofits have exploded amid the Covid-19 pandemic, recession and natural disasters.
More than 90% of nonprofits said they were negatively affected by COVID-19, according to a survey conducted from May 28 to June 3 by the Charities Aid Foundation of America.
Money may be tight on you, too, but there are ways to donate to charity this year without dipping into your bank account. If you have a stash of airline miles, hotel points, or credit card points that collect dust, you can choose to donate them to a variety of organizations.
If you have no way or intention of using such rewards yourself – which could be the case in the short term for travel miles in particular, as the pandemic rages on – giving them away may make sense. Many loyalty programs offer the option of doing this directly, and some nonprofits even specialize in collecting loyalty miles.
But here are three things to know about the process beforehand:
1. You generally cannot deduct such a donation from your taxes.
If you choose to donate your hotel points or airline miles to charity, you will not be entitled to a tax deduction, as you might be with cash donations. The IRS generally doesn’t treat your rewards as income, so you can’t include them if you itemize your deductions.
And generally, if you get a standard tax deduction, you can’t claim any charitable donations at all, whether you donate points or money. However, in early 2020, the CARES Act introduced an incentive: taxpayers who benefit from the standard deduction are entitled to a tax deduction of $ 300 for charitable donations.
But even still, donations of points and miles will not be eligible for write-off.
2. The charity is unlikely to derive the greatest value from such a donation.
Multiple rewards programs for airlines, hotels and credit cards make it relatively easy for you to donate your rewards in a few clicks. But what is not so easy to understand is the value of the points you give away.
Many loyalty programs do not disclose how many dollars the charity you choose will receive for your donation of points or miles. But in most cases, it won’t be the same value you might expect to get if you used them for travel.
Take Hilton HLT,
Honor points, for example. Through its Giving Back program, Hilton Honors supports donations for a wide variety of charities, including the American Red Cross, Habitat for Humanity, and Make-A-Wish Foundation. For every 10,000 Hilton Honors Points you donate, the charity of your choice will receive $ 25.
According to The actual valuations of NerdWallet, Hilton Honors Points are worth approximately 0.4 cents each.
This means that 10,000 points would normally equate to about $ 40 in refunds for Hilton hotels. If you choose to donate your Hilton Points to charity, much of the value is lost.
3. Cash rewards, from a credit card with cash back, might be a better option
Instead of donating the points and miles earned with your credit card directly to a charity, consider donating the cash back credit card earnings instead. This might be a better solution for you and the charity:
- You can still benefit from the tax deduction. If you cash in your rewards as usual, then turn around and donate that money to charity, you will still usually be able to get an itemized deduction. In this scenario, you are giving real money now, not points or miles.
- You will get good value for your rewards. The value of the money you give to your charity is transparent and straightforward. Save your points and miles for travel, and you’ll know you can use them later to their maximum value. (But do some research on the charity and the associated fees so you can feel good about where your money is going.)
- It’s easier for the association. Sometimes the airline miles you donate are given as a cash donation to the charity, but sometimes the charity controls the actual miles to be used for flights. Flights can help transport sick children to get the care they need, reunite service members with their families, or mobilize emergency responders to provide critical assistance. In many cases, the charity could be indebted for the uneven availability of award flights in order to redeem donated miles. With a cash donation, a charity can use the money in the easiest and most efficient way for what it needs most.
Nerd tip: Be aware that if you use your credit card itself – as opposed to the rewards you get from that card – to charge for a charitable donation, the processing fee may reduce the value of your gift. Donate by cash or check and the charity receives the full amount.
Of course, many charities are happy to accept donations in any form that you are able to give. So if you’re inclined to give but can’t redeem cash, donating your unused points or miles can still be rewarding for you and the organization. Nicholas Ellinger, brand director at Moore DM Group – which supports fundraising for some of the world’s largest charities – encourages people to “make it a” and “gift,” where you donate your miles and a cash donation, rather than an “or” gift, if your finances allow. “
But before you click on the Donate button, make sure you are certain of your choice. Once your points have been distributed, the donation cannot be canceled.
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Erin Hurd is a writer at NerdWallet. Email: [email protected]