A charitable contribution deduction is allowed for the portion of rebated credit card purchases (credit card points or credit card miles) that are transferred to a qualified charity. However, unlike contributions charged to a credit card, these rebate contributions are not actually made by the use of the card. Rather, they are held by the credit card company in a custodial account for disbursement to charity.
When can you deduct donated credit card points on tax return?
Accordingly, the charitable contribution is made (and deductible) when the rebates are transferred to the designated charity. To be deductible, the taxpayer must have the choice of donating the rebate or receiving it himself. Also, a credit card company’s automatic transfer of a certain percentage of the taxpayer’s charges to charity is nondeductible, even if the taxpayer designates the charity, since that amount was never available to the taxpayer. Similar to credit card rebates, rebates from a web-mall vendor that the taxpayer irrevocably chooses to donate to charity, rather than receiving them in cash, are tax deductible in a similar way that donations to charity via credit points and airline miles are.
How to deduct charitable donation with credit card points?
Cardholders will normally receive a periodic statement from the credit card company showing the amount transferred to charity on their behalf and when the transfers occurred. If the amount transferred at one time is $250 or more, the taxpayer must receive a written acknowledgment from the charity before a deduction is allowed. In this instance, the credit card company will normally provide the charity with the name and address of the taxpayer. However, in some instances, it may be necessary for the taxpayer to follow up with the credit card company and/or charity to ensure he receives all of the information necessary for claiming the charitable contribution deduction; i.e., the date of the contribution by the credit card company must be included.
Donating Credit Card Reward Points
Most large credit card companies will do this for their credit card holders who are making deductible contributions with their cards.