Your donation will be used to directly benefit the Warriors Choice Wellness retreat and Service Dog program for combat veterans.
Our service men and women voluntarily put their lives and safety in danger in service to their country. Their sacrifices should not be overlooked in their care and support after their military commitment is completed.
Key Tax Q&A for the Nonprofit
How does the IRS say we need to treat crypto?
The IRS has classified crypto as a virtual currency and treated as property (not a fiat currency or security).
Why should my non-profit accept crypto donations?
Donors are looking for creative ways to give that both supports their non-profit of choice and also minimizes their tax liability.
How does donating crypto benefit donors?
If a donor sells crypto that has appreciated in value, they will have to recognize a capital gain on the sale. If, instead, the donor decides to donate that crypto, they will get the double benefit of receiving a charitable contribution deduction while also avoiding capital gains.
What the reporting requirements for crypto donations?
For crypto donations valued over $250, a standard noncash donation receipt required for the donor.
For crypto donations valued over $500, the donor must file Form 8283 (Noncash Charitable Contributions)
For crypto donations valued over $5,000, the donor must receive a qualified appraisal prepared by a qualified appraiser. This must be signed by the donee organization. If sold within three years of receiving it, the donee organization must complete Form 8282.
What does my non-profit have to do internally to accept crypto?
All non-profits should have a gift acceptance policy in place. If you do already have one, then simply adjust your policy to acknowledge that you are now accepting cryptocurrency and specify that it will be either held or sold immediately.
Should I hold donated crypto?
For most non-profits, we recommend liquidating crypto immediately and do not recommend holding. Crypto values can swing wildly, potentially reducing the impact of the gift, and most donors intend for their gift to benefit the mission immediately.
The meteoric rise of cryptocurrency over the past year has left many “hodlers” with large gains in value. Since the IRS currently recognizes crypto as a noncash asset, not a currency, as soon as you attempt to take those gains you are faced with some potentially significant tax consequences. However, the IRS has also provided some avenues to minimize your tax burden while also helping your favorite 501(c)3 non-profit. Here are four reasons why I am donating my crypto:
It’s a convenient way to give
If you were to sell your crypto before donating it, you would have numerous steps involved such as moving the crypto between wallets or exchanges, converting to fiat, and then withdrawing to your bank account. Each one of those steps can be very unforgiving if you’re not paying close attention. When donating my crypto, I only need to enter a receiving address, the amount of crypto I’m donating, and I’m done. It’s that simple.
Take advantage of the Charitable Contribution Credit
When you itemize your deductions, the IRS lets you deduct the amount given to your non-profit. However, this is not a dollar-for-dollar deduction. The total amount of your deduction will equal your contribution times your ordinary income tax rate. If I donate $10,000 in crypto and my tax rate is 24%, my charitable contribution deduction would be $2,400.
Avoid the Capital Gains tax
If you were to sell your crypto for more than you acquired it, you would be faced with either a short-term or long-term capital gain. Short-term capital gains are made on assets held a year or less and your ordinary tax rate is applied. Long-term capital gains are for those held longer than a year and are taxed at either 0, 15%, or 20% depending on your income level. Using an example of someone married filing jointly, if you held your crypto for 11 months (short-term) and sold you could pay up to a 32% capital gains tax, or if you held your crypto for 13 months (long-term) you would pay 15%, or if you donated your crypto you would pay $0!
Maximizing my gift
Let’s say I had $100,000 worth of crypto, held for over a year, that originally cost me $10,000. If I decided to sell the after-tax proceeds before donating it, I would potentially owe a capital gains tax of $13,500 ($90,000 x 15%), and my donation would be $86,500. By donating it instead of selling it, I’m able to give an additional $13,500! Donating my crypto allows me to make a greater impact.
If you’d like to donate crypto to a non-profit that doesn’t accept it yet, or if you’re a non-profit interested in receiving crypto donations, I highly recommend you check out Engiven. Engiven is a cryptocurrency donation platform that is fast, secure, and simplifies the entire crypto-donation process for your non-profit.
The basic examples above are for illustrative purposes only, so please consult your tax advisor to see how different giving scenarios would impact you.
