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Key Takeaways
- You can write off the value of your donated cryptocurrency as a tax deduction!
- In addition, donating appreciated cryptocurrency is not subject to capital gains tax.
Can I donate cryptocurrency?
Yes. You can donate to organizations with 501(c)(3) status that accept crypto donations.
Is donating crypto a taxable event?
Donating appreciated assets like crypto is one of the few instances where the IRS allows you to ‘double dip’ on tax benefits.
In most cases, disposing of your cryptocurrency requires you to incur a capital gain or a capital loss. However, donating cryptocurrency to an organization with 501(c)(3) status is not considered a taxable event.
In addition, cryptocurrency donations can be treated as itemized deductions on your tax return and potentially reduce your income tax liability for the year.
How do crypto tax deductions work?
If you’re donating cryptocurrency you’ve held for more than 12 months, you can deduct the fair market value of your cryptocurrency at the time of the donation.
However, donating your cryptocurrency after 12 months or less means that you can only deduct your original cost basis.
Should I donate crypto that has lost value?
Donating cryptocurrency that is currently trading at a loss can be treated as an itemized deduction.
However, financial advisors typically recommend that you prioritize donating appreciated assets. After all, depreciated assets are eligible for tax-loss harvesting, which comes with its own tax benefits.
Do I need a letter of acknowledgement?
For contributions worth more than $250, you’ll be required to get a written letter of acknowledgment from the charitable organization. The letter should include the name of the charitable organization, the name and amount of cryptocurrency given, and whether you received any goods or services in return for your donation.
Should I donate cash or cryptocurrency?
Not sure whether to donate cash or cryptocurrency to charity? Remember, the answer is likely dependent on your specific circumstances, and you should speak to a tax advisor before making a decision.
What are the benefits of donating appreciated cryptocurrency?
Appreciated cryptocurrency can be donated without incurring a tax liability. Then, you can use your cash to buy back into your position at a higher cost basis, which can potentially reduce your capital gain in a future disposal event.
It’s important to remember that for cryptocurrency and other forms of property, your donation deduction is limited to 50% of your adjusted gross income (AGI).
Can crypto donations reduce my tax bill?
As noted earlier, crypto donations can be treated as itemized deductions on your tax bill. Typically, crypto donations only reduce your tax liability for the year if the total value of all of your itemized deductions is greater than the standard deduction.
Here are the standard deduction amounts in the 2024 tax year.
State/local taxes, real estate taxes, and mortgage interest can also be treated as itemized deductions.
For more tips on how to legally reduce your crypto tax bill, checkout the video below.
How do I report crypto donations on my taxes?
Donations and other itemized deductions are included on Form 1040 Schedule A. When claiming a crypto donation, you should include the type of cryptocurrency donated and its fair market value at the time of the donation.
If you’ve donated more than $500 of cryptocurrency to a charity during the tax year, you’ll also be required to fill out Form 8283. If you’ve donated more than $5,000 of cryptocurrency, the organization receiving the property must acknowledge receipt and confirm it’s a qualified organization by completing and signing Part IV of Section B of Form 8283.
How are crypto donations taxed in other countries?
Let’s explore how crypto donations are taxed around the world.
UK: Crypto donations are tax deductible. However, you may incur a capital gain if the value of your crypto has increased since you originally received it.
Australia: Crypto donations can be deducted if you donate to a registered charity!
Canada: While crypto donations are tax deductible, donating your cryptocurrency is considered a disposal subject to capital gains tax.
Get started with CoinLedger
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Frequently asked questions
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How we reviewed this article
All CoinLedger articles go through a rigorous review process before publication. Learn more about the CoinLedger Editorial Process.
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