Originally Posted by
cparekh
My guess is the both brp and gemac are correct, there should be a consistency between taxable income and deductible donations, but it's probably too complicated to bother because assigning a value to miles would prove very complicated.
This topic really interests me. I think I'll put a post on my blog about it.
The deduction rules are fairly straightforward. First, the recipient has to be a charity-- one of those 501 (c) (3) organizations. Second, the deduction cannot exceed the basis you have established in the property donated (except for certain appreciated assets like stocks, art, etc).
Assuming you have a charity in mind, then the issue comes down to basis. For miles earned from employer-paid trips, that's zero (if you were taxed on the receipt of them as income, that income would be your basis). For miles you buy for cash, it would be your cost. For miles you win in a contest, it would presumably be whatever the income value of the prize is. For miles you earn on your own paid trips? Most expert opinion says the basis is zero (effectively treating the miles as a gift from the airline to you; gifted assets inherit the basis of the giver, which is very near zero according to the airlines' financial disclosures). To establish otherwise you would need an ironclad allocation scheme for every ticket (effectively taking the view that every trip is really two transactions: how much of your price is for travel and how much is for "buying miles"), and not even the most aggressive tax advisors have dared dream up such a scheme, nor would the IRS be likely to buy into it.
That brings up interesting side questions about partner miles, for further expert debate. Every partner is buying miles explicitly from the airline. If they then gift them to you, you would technically inherit their basis, but since they are deducting that cost as a business expense, their basis falls to zero. Still, there is a potential further issue with rental car partner miles. Those partners explicitly charge you for receiving miles (a charge they say is to recover the excise taxes they pay on their acquisition). Technically if you paid those charges yourself (not reimbursed for business), then you might be able to establish some tiny basis in those car-awarded miles.
Bottom line: donate miles to feel good, period. There's no hidden pot of cash in deducting them...