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Deducting your Discover Card credits

August 31, 2010

The TaxProf reports:

In Priv. Ltr. Rul. 2010-027-015 (Apr. 5, 2010), the IRS ruled that (1) cash rewards on credit card purchases do not constitute income under § 61 to the card holder, and (2) cash rewards paid out to charity at the direction of the holder constitute a charitable contribution on the date the amount is received by the charity.

It's always good to get a deduction on non-taxable income, and it makes donations using such cards tax-efficient. But be careful:

The IRS also ruled that the written acknowledgment provided to credit card holders did not satisfy the recordkeeping requirement of § 170(f)(17) because it did not include the date the credit card company remitted the contribution amount to the charity.

Without such acknowledgement, you can't deduct contributions over $250. Presumably the credit card companies are fixing that as a result of this ruling.

Now if I can just find a way to deduct my half-filled punch cards from defunct coffee shops.

Tags: TaxProf.