Donating cryptocurrency to nonprofits is becoming increasingly popular. Cryptocurrency donations are a way for nonprofit organizations to increase their revenue streams and reach a new base of donors.
For donors who hold cryptocurrency, it can be advantageous to donate crypto instead of donating traditional cash. That’s because there are tax benefits for cryptocurrency donors.
For donors interested in sending cryptocurrency donations, it is important to fully understand the tax and accounting considerations. Let’s go over some things you need to know in order to get started.
What Are the Accounting and Tax Considerations for Cryptocurrency Donors
The treatment of cryptocurrency from the IRS mainly revolves around a single document, Notice 2014-21. What this document states is that the tax principles of property transactions also apply to virtual currency. This puts virtual currencies in the same category of stocks and bonds, which are also viewed as property assets. The biggest takeaway from this is that donors can fully deduct cryptocurrency donations on their taxes.
For donors, charitable contribution deductions are calculated by determining the fair market value of the cryptocurrency at the time of the donation. The one catch is that if you have held the virtual currency for less than one year, the deduction has to be lesser of your basis in that virtual currency. If you have held the currency for over a year, you can deduct at the fair market value of the cryptocurrency up to 50% of your annual gross income.
Any donations worth over $500 have to be reported on a form 8283 “Non Cash Charitable Contributions” by the donor, along with a receipt from the non-profit organization.
The Bigger Picture: Major Tax Advantages for the Donors
The tax benefits of cryptocurrency donations for nonprofit organizations definitely lean more towards the donors. There is essentially normal tax treatment for the nonprofit organizations accepting these donations. Just make sure that your accountant is well versed in cryptocurrency and is aware of how to file everything correctly.
For the donors, the first benefit is one that also helps the non-profit receiving the donation. If the donor were to sell their position in cryptocurrency and donate the cash they receive in return, they would have to pay the capital gains tax on those funds. This ultimately results in a smaller donation for the charity.
Virtual currency donations are treated as property donations, meaning that they are fully tax deductible. This is likely the biggest benefit for donors, and should always be advertised by the non-profit organization that is accepting virtual currency donations.
Donors must report their contributions to the IRS so that they can receive these tax benefits. Also, make sure that you receive a receipt for your donation that you can provide to the IRS from the non-profit organization.
Important Things to Keep In Mind For Cryptocurrency Donors
For cryptocurrency donors who wish to take part in donating cryptocurrency to any organizations, there are some important considerations to keep in mind. Make sure to review these points to make the most out of your cryptocurrency contributions.

- When you realize a capital gain from your cryptocurrency, either by trading or cashing out, it is a taxable event.
- The IRS does not consider direct cryptocurrency donations a taxable event, meaning that donors aren’t required to pay capital gains tax.
- While it is possible to donate cryptocurrency to organizations anonymously, those who do miss out on the tax benefits tied to any donations. If you still wish to shield your identity from the organization receiving the donation, you can do so by using a ProtonMail email address.
- Make sure you receive a donation receipt from the organization you’re sending the cryptocurrency to, as it will make reporting the transaction easier when it comes time for taxes.
- If you have already donated cryptocurrency in previous years without reporting it, you may want to discuss filing an amended tax return with your accountant. The IRS acknowledges that there has been an extensive amount of noncompliance from taxpayers that hold or have held cryptocurrency, and as they continue to adjust to virtual currency, they will welcome corrections.
Aside from these key points, donating cryptocurrency is pretty straightforward from the perspective of the donor. By responsibly taking part in bitcoin donations, donors can increase the size of their gifts and deduct more on their annual taxes.
Conclusion
While the world of cryptocurrency can seem overwhelming, adopting cryptocurrency donations need not be be intimidating. The tax issues for the non-profit accepting the donations are actually minimal, as the IRS will give normal tax treatment. The filing process is slightly different though, so ensure that your accountant is up to speed with cryptocurrency tax protocols.
The benefits that your donors receive from taking advantage of virtual currency donations are too significant to ignore. They can avoid capital gains taxes on their contribution, write it off as a deduction, and have a more convenient donating experience. Donors even have the ability to donate anonymously, though they should still report donations to the IRS to receive the tax benefits.
For the organizations accepting virtual currency donations, it’s a great opportunity to expand your donor pool to the millennial generation. Millennials grew up with the internet and have been molded by it. They can take on the risks associated with cryptocurrency and see it as a safer asset because it isn’t tied to a central organization. As the younger generation continues to adopt cryptocurrency, bitcoin donations will continue to become more common.