Deducting Credit Card Reward Donations

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For years I’ve been accumulating reward points in Citi’s Thank You Network with my Citi mtvU credit card, usually turning them into student loan checks for ACS. With my student loans paid off and the conversion rate weaker (it used to be 2,500 point for $25, now it’s 3,300 for $25), I’ve been looking for an alternative in the gift card department. Unfortunately, none of the cards are really appealing and I thought we could convert the points into a charitable donation but I wasn’t sure how the deduction worked.

It turns out that it’s actually quite simple. As long as the charity is eligible (most of the ones listed in reward catalogs are eligible), you can deduct the donation as long as you’ve kept the necessary documentation and it has a cash value. If you donate airline miles, you can’t deduct it because they have no cash value. If you convert airline miles into a cash amount and that amount is donated, then you can deduct it.

If you want to find out more, you can check out this letter ruling by the IRS from July that explains everything.

{ 5 comments, please add your thoughts now! }

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5 Responses to “Deducting Credit Card Reward Donations”

  1. cubiclegeoff says:

    Is the conversion for donation even that much? Although I guess if its better than a gift card and you were going to donate anyway, it might be fine.

  2. Chuck says:

    The ruling says if you could receive a rebate of $X, but instead direct $X to charity, you can deduct $X.

    But that’s not happening, is it? You could receive a cash rebate of $X, but contribute $Y to charity, where $Y > $X. What I want to know is can you deduct $Y?

    For example if you have 10000 points that you can redeem for $60 cash, but a $100 charitable donation, do you deduct $60 or $100? It sounds like you can only deduct $60, because that’s the value of the cash you were eligible to receive. If someone makes the case that you could deduct the $100, then that would actually be cool. But as far as I can tell, the IRS ruling doesn’t say that.

  3. live green says:

    I saw this option with my Chase card and if the payout of points is a good match to dollars, I would rather just take the money out and donate it to the charity of my choice. It’s good to know that either way, I can deduct the amount.

  4. thunderthighs says:

    Nice! I never would have thought of this.

  5. I’d probably play it safe and not deduct it, since it is not worth the risk, if you were to get audited. I’d imagine that your risk to get audited is much higher than mine!

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