Charitable donations tend to be popular around the holidays, and this year the needs of many nonprofits have shot through the roof amid the COVID-19 pandemic, the recession and natural disasters.
More than 90% of nonprofits said they have been negatively impacted by COVID-19, according to a survey conducted from May 28 to June 3 by the Charities Aid Foundation of America.
Cash may be tight for you, too, but there are ways you can donate to charity this year without dipping into your bank account. If you have a stash of airline miles, hotel points or credit card points that are collecting dust, you can choose to give them away to a variety of organizations.
If you have no way or intention of using such rewards yourself — which might be the near-term case for travel miles in particular, as the pandemic rages on — donating them can make sense. Plenty of loyalty programs offer the option to do so directly, and some nonprofits even specialize in collecting donated frequent flyer miles.
But here are three things to know about the process beforehand:
1. You usually can’t write off such a donation on your taxes
If you choose to donate your hotel points or airline miles to charity, you won’t be eligible for a tax deduction, as you could be with straight-up cash donations. The IRS doesn’t typically view your rewards as income, and therefore you can’t include them if you itemize your deductions.
And generally, if you’re taking a standard tax deduction, you’re not able to claim charitable donations at all, whether you give points or you give cash. However, in early 2020, the CARES Act introduced an incentive: Taxpayers who take the standard deduction are allowed a $300 tax deduction for charitable donations.
But even still, donations of points and miles won’t qualify for a write-off.
2. The charity is unlikely to get the highest value from such a donation
Several airline, hotel and credit card rewards programs make it relatively easy for you to donate your rewards with a few clicks. But what isn’t as easy to figure out is the value of those points you’re donating.
Many loyalty programs don’t disclose how many dollars the charity you choose will receive for your points or miles donation. But in most cases, it won’t be the same value that you could expect to get if you used them for travel.
Honors points, for example. Through its Giving Back Program, Hilton Honors supports donations for a wide variety of charities including the American Red Cross, Habitat for Humanity and Make-A-Wish Foundation. For every 10,000 Hilton Honors points you donate, the charity of your choice will receive $25.
According to NerdWallet’s real-world valuations, Hilton Honors points are worth about 0.4 cent each.
That means 10,000 points would normally equal about $40 in Hilton hotel redemptions. If you choose to donate your Hilton points to charity, a major chunk of the value is lost.
3. Cash rewards, from a cash-back credit card, might be a better option
Instead of donating points and miles earned from your credit card directly to a charity, consider donating the earnings from a cash-back credit card instead. This could be a better solution for both you and the charity:
- You could still get the tax deduction. If you cash out your rewards as normal and then turn around and donate that cash to a charity, you’ll still usually be able to take an itemized deduction. In this scenario, you’re donating actual money now, not points or miles.
- You’ll get good value for your rewards. The value of the cash you donate to your charity is transparent and straightforward. Save your points and miles for travel, and you’ll know that you can use them later for their maximum value. (But do some research on the charity and any associated fees so you feel good about where your money is going.)
- It’s easier for the charity. Sometimes the airline miles you’re donating are given in the form of a cash donation to the charity, but sometimes the charity gets control of the actual miles to use for flights. The flights can help transport sick children to get the care they need, reunite service members with their families or mobilize emergency responders to provide critical aid. In many cases, the charity could be beholden to spotty award flight availability in order to redeem the donated miles. With a cash donation, a charity can use the money in the easiest and most effective ways for what it needs the most.
Nerd tip: Be aware that if you use your credit card itself — as opposed to rewards earned from that card — to charge a charitable donation, processing fees can cut into the value of your gift. Donate by cash or check and the charity gets the full amount.
Of course, many charities are happy to take donations in any form you’re able to give. So if you’re inclined to give but can’t swing the cash, donating your unused points or miles can still be rewarding for you and for the organization. Nicholas Ellinger, chief brand officer at Moore DM Group — which supports fundraising for some of the largest charities in the world — encourages people to “make these an ‘and’ gift, where you give your miles and a cash donation, rather than an ‘or’ gift, if your finances allow.”
But before you click the donate button, make sure you’re certain about your choice. Once your points have been given away, the donation can’t be reversed.
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Erin Hurd is a writer at NerdWallet. Email: firstname.lastname@example.org.