Value of Donated Miles?
 

Hi! I've got 125000+ NWA miles but am getting frustrated trying to book award travel for 2 adults and 3 children in June. I know its nearly impossible to book summer award travel but that's when I can take a vacation. We'll probably end up flying Southwest again.

I was considering my options with the miles. How much of a tax deduction can you get for donating them? Do they have a specific value?

Our church would give you a write off of $.02 per mile if the IRS allowed it.

Clarification
 

Ok -- to clarify I mean donating them using the NWA website donate option. I searched there and here before asking ....

According the Red Cross's Miles Donation Page "The IRS currently recognizes the donation of frequent flyer points as a gift from the airline to the charitable organization, therefore miles donated to the Red Cross are not considered tax-deductible by the individual donor."

So, they are deductible, but only for NW. :rolleyes:

Hmm... I'm not sure we want to go this route since it may lead the government to push for the taxation of frequent flyer awards. It would actually make sense to allow a deduction if the award was taxed in the first place as income.

The key word is 'if' and the answer is no --

They can still be donated, a lot of non-profits that send people on travel could use them and would appreciate having them, but they can't be deducted.

Now if you could sell them legally, you could collect the money and then donate it..... but that's a no-no too.

Bob H

Hell, I'll take them!

One argument is that you paid nothing for them (technically, it can be argued you paid nothing for them), so when you give away something worth nothing, there's no value given, so there's no deduction from earnings.

Steve B.

But what if you win the miles??? I won a million miles last year and have to pay taxes on them. At this point, I would think I should be able to donate some of these miles using the amount in taxes I paid as "cost" basis?

An excise tax is paid on miles in lieu of income taxes.

Who says you have to pay taxes on the miles you won? Was a 1099 issued?

I was told by the company that I won the miles from (Vonage) that I would be receiving a 1099 with a value of $25,000 for the miles.

Yeah there are some paradoxes with miles.

You do have to pay income taxes on winning miles

You do pay federal excise taxes

You do not get deductions for donations

The question is what your taxable basis is in the miles. For most miles, this is zero. For miles won in a contest where you paid taxes, you could very plausibly argue that your basis was the amount of income you paid tax on according to the 1099 or whatever other valuation method you used. In the case of lancemib, if you're accepting the valuation of 2.5c/mile that Vonage is using for income tax purpose, then you could definitely argue that you could take a 2.5c/mile deduction for donating them since you have a 2.5c/mile taxable basis in them. But this case is very much the exception rather than the rule - certainly miles earned from flying have a zero tax basis in the US. And lancemib certainly would have to argue a bit with the IRS if they audited since the case is so unusual.