mieage donations and tax deduction
 

Through my website, I received the following email. Anyone know the answer?

Do you know whether one can deduct a donation of frequent flyer miles on their federal/state income tax? The donation is to a 501C3 organization. Do they value the miles at 2 cents per mile?

as long as earned miles are not "income" it is probably better to forget to try to deduct donated miles.

This is probably one for a lawyer or accountant, but the source of the money or other thing of value that's contributed isn't an issue. It doesn't have to be "income" to be deductible. My concern would be with attaching a value to the miles. Two cents a mile seems to be sort of an airline industry standard, but I'm not sure the IRS would buy that. Then, you're opening the door to an IRS evaluation of the miles you earn as income, based on the same value you placed on them as a deduction. I'd stay away from taking a deduction.

I read somewhere recently (wish I could remember the source) that one cannot deduct a mileage donation.

I e-mailed my accountant Frank who's a friend of mine and knows many of the tax laws... and gave him the inside flyer address. I'll let you know if he has an answer. CATMAN

You cannot deduct in both Canada and the USA. There is an article on cnn.com which says the same.

Reason: Airlines don't consider them to have cash-equivalent value - hence no deduction.

I'll agree with anyone who says "that makes no sense" but I don't think this is a good issue to try to fight IRS/Revenue Canada on.

Regards to all,

I agree -- as a *gulp* corproate tax accountant, I would not recommend taking a deduction for the air miles.

A while back the IRS tried to tax the value of the FF miles a person received. They chose instead to tax the companies that purchase bulk miles (Credit Card companies, Car Rental Companies etc...). This prevented individuals from picking up income on the FF miles. If individual were required to recognize income on their FF miles, I would agree that if you donated them you would be able to take a deduction. However, dont pay tax on them -- cant get a deduct.

This could be compared to the issue that when you volunteer for a charity you cannot take a deduction for your time -- just your milage to and from the charity.

--Jim

P.S. Any tax related comments I make are for your information only any cannot be relied upon for any tax filing positions. Please consult your own tax advisor to discuss your specific situation with him or her. Also, I will not answer any personal tax questions sent to me via e-mail or posted online.

I know of no authority to deduct the gift of "miles" from within a FF account.

There is a lot of theory going either way, but the fact that a value is difficult to establish (against ff rules to sell, so no market is available), and add to that the Congressional ban on the IRS taxing the miles as income, and I think the case is made that one does not have a US income tax deduction.

John (CPA)

I agree completely with all of those who have opined that you cannot take a tax deduction for the donation of the miles. Although tax is not my specialty, I have read several reports on this, and all of the reasoning discussed above is relevant. As noted, if any miles were earned on corporate-paid travel, the IRS will consider that you have incurred no personal cost to accrue the miles, therefore have no cost basis, and are giving away something that cost you nothing. Don't know of any reported case law on the subject, though.