You may have questions about donating crypto to nonprofits. So let’s look at just how easy it can be.
If you are looking for a tax break, or just want to put good into the world, you may have questions about donating crypto to nonprofits. And you wouldn’t be alone.
Cryptocurrency donations to nonprofits are growing in popularity every day, and with good reason. When done right, they are fast, and easy, and offer greater tax incentives than donations made with fiat currency or debit card payments. This is true regardless of your tax bracket because the IRS considers cryptocurrencies capital assets, similar to real estate.
Because of the popularity of crypto donations, nonprofits and their payment processing companies are increasingly happy to accept donations in Bitcoin and other cryptocurrencies. And the list of organizations accepting these gifts is growing every day, with examples including:
- Compassion International
- Fellowship of Christian Athletes
- The Salvation Army
- US Figure Skating
- Saddleback Church
- Texas A&M Foundation
- North Point Ministries
- The Signatry
- Samaritan's Purse
And many others.
So, let’s look at just how easy it can be to send crypto to nonprofits, and give your tax return a little reprieve. For more on the tax benefits of donating crypto, read this article: The Tax Incentives of Donating Cryptocurrency
Option 1: Cash out and Donate the Proceeds
It may seem that the best and easiest way to donate the proceeds of your crypto windfall to nonprofits is to sell the crypto and donate the cash. What many don’t realize, however, is that this option may have steep tax penalties for you.
You see, according to the IRS, crypto is not currency–it’s property. And like other property, when you sell for a net capital gain, you may owe capital gains tax. CNBC explains “If you hold digital currency for more than one year, it may qualify for long-term capital gains rates of 0%, 15%, or 20%, depending on taxable income.”
And to make matters more confusing, if you hold your crypto for less than one year, you may incur income taxes instead. While your tax advisor will be able to help you navigate this mire, there is a much easier, and much more tax-efficient way to give a nonprofit your crypto donations.
Option 2: Donate Directly to the Nonprofit
By far the best option is a direct crypto donation to the nonprofit. Here, through a payment processor or the nonprofit’s internal payment acceptance or donation platform, you can arrange a crypto donation just as easily and smoothly as you can donate cash (via a card transaction) or other gifts.
This type of donation features a host of benefits for the donor. First, the gift is tax-deductible, just like any other gift of property. Secondly, because you are not selling the property, you’ll pay neither capital gains tax nor income tax on the proceeds.
For nonprofits interested in cryptocurrency gift acceptance, there are several options available. Owning and managing their own crypto wallet on an existing exchange is one option. This way, they can accept cryptocurrency donations directly from donors. The downside? This doesn't provide much support. A board of directors or CFO would likely need to add a crypto expert to inform their organization's decisions.
Another option is partnering with another 501c3. As the National Council of Nonprofits says, a “nonprofit can accept crypto support through another 501(c)(3), such as a donor-advised fund (DAF), without taking custody of cryptocurrency.” This process can make it possible to accept crypto donations but may include fees or limitations that make the process a hassle.
Finally, a nonprofit may partner with a crypto donation platform like Engiven. As we’ve explained in our blog, with Engiven, “we handle the complicated side of things. You don't need to know about crypto. You don't need to follow the market. You don't need to understand how blockchain technology works, or even know how to talk about crypto. With Engiven, receiving crypto for your nonprofit is as easy as putting a button on your website.”
Our giving platform includes a range of functions. These include tax receipts and appraisals (required for crypto donations over a certain dollar amount). We make it possible to manage your donations as cryptocurrencies or to convert them easily to USD.
You CAN send crypto donations to nonprofits
Once a nonprofit has set itself up through a crypto donation platform like Engiven, sending them your donation couldn’t be easier.
You will access the platform through a secure link on the organization’s website. Follow the prompts. You'll be asked to select the currency you wish to donate and the amount.
Then, you'll receive a QR code and public address to use for sending your crypto donation. Once the donation is sent, Engiven will monitor the blockchain for verification and send you a donation receipt via email when it completes.
Finally, Engiven exchanges the crypto you donated for USD, granting it to the nonprofit you selected.
Though there are a few additional steps, it’s no more difficult than a cash or credit card donation. They will send you the tax paperwork you need to claim your deduction.