Donate cryptocurrency to a donor-advised fund

What is a cryptocurrency donation?

Cryptocurrency donations are an effective way to optimize crypto investments for charitable giving. While choosing to sell cryptocurrency and then donating the after-tax proceeds requires paying a capital gains tax, directly donating cryptocurrency eliminates this step. Donors may also claim a fair market value charitable deduction for the tax year in which the gift is made to receive additional savings.

Many of the donor-advised fund programs that Ren administers accept the donation of cryptocurrency assets into new or existing donor-advised funds and charitable trusts, which can potentially increase the donation amount by up to 20%. This maximizes the value of contributions to causes you care about while allowing you to benefit from tax efficiencies.

Sell crypto and donate Donate directly
$1,000,000.00Current value$1,000,000.00
$275,000.00Original purchase price $275,000.00
23.8%Capital gains tax rate23.8%
$725,000.00Capital gains on sale$ –
$172,550.00Tax owed$ – 
$827,450.00Charitable contribution$1,000,000.00

Benefits of donating cryptocurrency

Donating cryptocurrency is a non-taxable event, meaning you do not owe capital gains tax on the appreciated amount and can deduct it from your taxes.

Cryptocurrencies use cryptography and blockchain technologies to encrypt, secure, and verify transactions and proof of ownership.

Cryptocurrency systems are not tied to a central authority, thereby increasing user privacy protection and providing a degree of anonymity.

Unlike traditional transaction methods, which can take days to process, cryptocurrency donations can process in minutes.

How does a cryptocurrency donation work?

You can choose to donate in any of the majorly traded cryptocurrencies, including Bitcoin, Ethereum, Chainlink, Litecoin, and more through your crypto wallet. The amount you donate is converted into U.S. dollars, with the net conversion value transferred to your donor-advised fund investment account.

The value of cryptocurrency is based on supply and demand, so its rate of exchange can and will fluctuate over time.

It’s easy to donate and can be done in three simple steps! Find the widget located at the bottom of the account details page or go to renaissancecharitable.org/donate-cryptocurrency and follow these steps:

  1. Pledge: Enter your intended crypto donation, including the name of your donor-advised fund or charitable lead trust in the notes field.
  2. Info: Enter your contact information so that you can be credited with the donation.
  3. Donate: Use the wallet address provided to transfer the crypto. Note that the donation will be accepted even if you donate an amount that differs from your pledge.
woman-close-up-on-phone

Considerations before donating cryptocurrency

The IRS treats virtual currency as property, so its deduction value can vary depending upon how long you’ve held it and how you acquired it.

Short-term capital asset
Donations of cryptocurrency not held as an investment (such as received for services) or held as an investment for less than a year will receive a deduction of the lesser of cost basis or fair market value up to 50% of adjusted gross income.

Long-term capital asset
Donations of cryptocurrency held over a year can receive a fair market value deduction up to 30% of adjusted gross income. Much like appreciated stock, this is an ideal situation for donating crypto.

Gifts of appreciated non-cash assets, like cryptocurrency, can involve complicated federal, state, and local tax analysis and other concerns such as the 3.8% Medicare net investment income surtax.

Please note that all cryptocurrency donations are non-refundable. It’s best to seek advice from your CPA regarding the characterization and tax treatment of any gains or losses before donating virtual currency.

Get started with a cryptocurrency donation

Are you ready to have a conversation about cryptocurrency donations or other forms of charitable giving? Fill out our contact form today.