Rebates Sent to Charity Are Deductible

By Elizabeth Schwinn

People who direct their credit-card companies to donate rebates to charity may deduct the rebates from their income taxes, the IRS has ruled.

A credit-card issuer proposed to offer a credit card to benefit charity. Customers who use the card would earn a rebate on their purchases from participating stores and then be asked whether they wanted to donate the rebate to charity.

The IRS said that rebates donated to charity were deductible. Rebates of more than $250 require charities to send customers a written acknowledgment of the gift.

While the ruling applies only to the specific proposal reviewed by the IRS, it serves as an indication of the agency’s thinking on such rebate-donation arrangements. As is its custom, the IRS did not identify any of the parties involved (Letter Ruling 200228001).