Bitcoins

The donation of cryptocurrencies to charity is on the rise, and more people are choosing to donate without paying much attention to Bitcoin price or the price of other cryptocurrencies.

Crypto Giving Tuesday, a campaign created by The Giving Block, a crypto donation and fundraising platform for NGOs and individuals, had a 583 percent increase in digital asset donations in 2021 compared to 2020.

Cryptocurrency investments, such as Bitcoin, held for more than a year, may give a unique opportunity for philanthropic-minded individuals to use highly appreciated Bitcoin prices to achieve maximum effect with charitable giving.

Donating long-term held Bitcoin investments can help charities raise more money. First, you may be able to avoid paying capital gains tax if you sell at any Bitcoin price yourself and donate the earnings, potentially increasing the amount available for charity by up to 20%. Second, if you list deductions on your tax return rather than accepting the standard deduction, you may be able to claim a fair market value from your Bitcoin price charitable deduction for the tax year in which the donation is made, and you can choose to use the savings to give more.

Many prominent charities and foreign relief organizations, such as the American Red Cross and Save the Children, have established systems to accept cryptocurrencies donations or use platforms that allow them to turn them into cash quickly. Smaller organizations, which account for the vast majority of registered NGOs, are attempting to figure out how to accept cryptocurrencies donations and whether it makes sense to do so.

Donating with cryptocurrencies is appealing because it allows donors to avoid paying capital gains tax. If donors convert the virtual currency to cash before giving it away, they will be liable to the tax, which means less money will go to their chosen charity. This is widely regarded as an added benefit.

According to cryptocurrency owners who have donated parts of their assets to charity, tax savings was a primary motivation behind their crypto gifts. Many investors said they had trouble locating organizations that would accept the virtual currency, which could be risky for charities to hold.

 

What is the Best Way to Donate Cryptocurrency to a Charity?

Due to the difficulty of setting up a digital wallet, most charities cannot accept direct cryptocurrency donations.

If a donor creates a wallet for a charity but keeps the keys to the wallet, it may not be deemed a donation. Instead, a charity can accept Bitcoin donations through a third-party processor or a donor-advised fund.

For a nominal Bitcoin price charge, 1%, third-party processors like Crypto for Charity facilitate cryptocurrency payments to nonprofits. On behalf of the charity, the processor turns the donation into cash.

For example, the Center for Excellence in Education (CEE), a nonprofit organization that promotes scientific and math programs and competitions for high school students and instructors, has recently begun taking Bitcoin and other cryptocurrencies through Crypto for Charity.

 

How Bitcoin Intends To Aid Cryptocurrency Donations

Bitcoin can be converted to cash and invested by a donor-advised fund that accepts Bitcoin donations, such as the Fidelity Charitable Gift Fund. The donor can take a charitable tax deduction and then recommend a particular charity to whom their donation should be directed.

Bitcoin, like stocks and other assets, can be donated to charity. Although donating cryptocurrency can be a little difficult, Bitcoin aims to bridge the gap between charities and cryptocurrencies donations.

If taxpayers send Bitcoin directly to a charity, they can avoid paying capital gains taxes while claiming the full payment as a charitable deduction. The difference between the purchase Bitcoin price (the basis) and the selling price is capital gains.

If a taxpayer sells Bitcoin and contributes the after-tax proceeds to charity, the capital gains will be subject to either short-term or long-term capital gains taxes, depending on how long the taxpayer held the Bitcoin before selling it. Short-term capital gains are taxed as regular income at 10% to 37%. Long-term capital gains tax rates of 0%, 15%, or 20%, depending on the amount of taxable income, will apply if they kept the asset for at least a year.

If you list your deductions, you can claim a charitable deduction based on the amount of money you donated. Otherwise, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 limits them to a $300 (single) or $600 (married filing jointly) above-the-line charitable deduction.

 

By Jim O Brien/CEO

CEO and expert in transport and Mobile tech. A fan 20 years, mobile consultant, Nokia Mobile expert, Former Nokia/Microsoft VIP,Multiple forum tech supporter with worldwide top ranking,Working in the background on mobile technology, Weekly radio show, Featured on the RTE consumer show, Cavan TV and on TRT WORLD. Award winning Technology reviewer and blogger. Security and logisitcs Professional.