By Colleen Hill, CAP
Vice President of Development & Donor Services

It’s been over a decade since Bitcoin entered the scene as the first decentralized cryptocurrency, but digital currency is still a relatively new and nebulous concept for many – even those who own a version of it. For some of the early and more common cryptocurrencies like Bitcoin and Ethereum, the values over the long-term have held well and, for early adopters, increased significantly in value.

We’ve tracked a noticeable increase over the past 12 months of calls inquiring about donating cryptocurrency to charity, so I want to share the basics should your clients be interested in creating good with their crypto holdings. While cryptocurrency can be donated to charity, just like stocks and other property, the logistics can be a bit more complicated.

The tax benefits of donating cryptocurrency are similar to donating stocks. If the donor has held the property long-term (at least 365 days), they can avoid paying a capital gains tax and claim a charitable deduction for the fair market value. Capital gains is the difference between the purchase price (the basis) and the selling price. The charitable deduction is limited to 30% of income when donated to a public charity (such as the Community Foundation), but excess deductions may be carried forward for up to five years.

The difference between donating stocks and cryptocurrency is that the donor must file an IRS Form 8283 for donations of $500 or more and must get a qualified appraisal from a qualified appraiser to submit with their tax return for any gift of $5,000 or more. Donors should also be aware that most charities are not set up to accept direct donations of cryptocurrency. For the small number who are ready and willing to accept cryptocurrency, they are likely using a third-party to process the donation. The donor should be prepared to pay for both processing and appraisal fees. These can sometimes be paid from the gross proceeds of the sale of the gift and should be discussed with the charity in advance of executing the gift.

Any fund at the Community Foundation of the Holland/Zeeland Area is qualified to accept cryptocurrency, including Donor Advised Funds. Donating cryptocurrency to a Donor Advised Fund will allow your client to receive the immediate tax benefits of the gift and advise on how the funds are distributed to their favorite charities over time. If you or your clients have any questions about donating cryptocurrency to CFHZ, please contact Colleen Hill at chill@cfhz.org or 616-994-8853 to discuss.

THE BASICS

Benefits of donating cryptocurrency to a public charity:

• Avoid capital gains if property held at least one year
• Charitable deduction of fair market value of gift
• Charitable deduction limited to 30% of AGI, but excess donations may be carried forward for up to five years.

Things to consider:

• Must file IRS Form 8283 for gifts valued at $500 or more
• Must obtain qualified appraisal from a qualified appraisal for gifts $5,000 or more
• There will most likely be fees for gift processing and appraisal