June 2, 2021

Key Tax Q&A for the Nonprofit

In this post, we discuss FAQs around crypto donation taxes.

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.