Crypto Donation: Is it tax-deductible?

28 Mar, 2023 · 5 min read

A crypto donation can help you reduce your crypto taxes by increasing your tax deduction.

How?

Today, we’ll cover how donating crypto can help great causes and, at the same time, save you money with a tax deduction, reducing your crypto tax bill.

In this article:

Can I donate cryptocurrencies to charity?

Yes. There are several charities in the US and worldwide that accept cryptocurrency as a payment form. You can donate Bitcoin and any other cryptocurrency as long as the charity accepts it as payment.

Our partner, TheGivingBlock, makes it easy for taxpayers to donate Bitcoin while enabling charities and organizations to accept a crypto donation.

Is donating Bitcoin taxable?

In short, no. Donating crypto is not a taxable event, nor is it subject to any taxes. On the contrary, you’ll probably be able to get a bitcoin donation tax deduction from that contribution if you meet certain criteria.

You’ll only be able to claim a tax deduction if you meet criteria, such as donating the BTC to a qualified charitable organization. If you simply send crypto to another individual as a gift, the tax considerations are different. As a result, if you send your BTC to an individual, you won’t meet this requirement and won’t be able to take a tax deduction.

The tax implications for gifting crypto are different from those for donations. Please check our guide on crypto gift taxes to clarify any questions.

Is sending crypto to a wallet taxable?

No. Sending crypto from one wallet to another is not a taxable event in the US. You can transfer crypto from as many addresses and wallets that you wish and not pay taxes on it.

Only if you sell any of that crypto will you have a taxable event. Sending crypto, gifting crypto to someone, and donating crypto to a charitable organization are different things and are treated differently for tax purposes.

Remember that when transferring crypto between wallets, you incur fees, which will probably not be tax-deductible. Learn more about the tax implications of transferring crypto between wallets in our guide.

Are crypto donations tax-deductible?

They can be. Let’s explore the details.

In the US, you can donate Bitcoin or any other crypto to a qualified charitable organization and receive a tax deduction. After you donate crypto to that organization, you can claim a charitable contribution tax deduction if you claim itemized deductions on your tax return.

How to calculate your Bitcoin donation tax deduction

When you donate crypto, if the current Fair Market Value (FMV) of your donation is higher than your cost basis, you can claim a tax deduction based on that FMV if you had held the crypto for more than 12 months. Otherwise, you can only deduct an amount up to your basis in the crypto.

Donate 0.1 Bitcoin: What is the tax deduction?

You bought 1 Bitcoin at $30K in December 2020. In January 2022, 1 Bitcoin is worth $60K. You plan to donate 0.1 BTC at that time, which is worth $6K. This $6K is your fair market value at the time of your Bitcoin donation.

What was your cost basis? When you bought Bitcoin, 0.1 BTC was worth $3K (0.1 BTC*$30K). That’s your cost basis.

As a result, you can claim a tax deduction of $6K since the FMV of 0.1 BTC in January 2022 is higher than your cost basis, and you’re donating Bitcoin after 12 months of holding. Long-term holding can get you can a tax-reduced rate across countries (CoinTracking automatically shows which coins in your portfolio can give you a tax benefit).

Why donating crypto is better

If you donate an appreciated asset (like crypto), you won’t need to report any capital gain for the difference between the FMV and your cost basis.

As a result, it is better to donate your crypto directly to a qualified charitable organization than to sell it and donate the sales proceeds unless the FMV is lower than your cost basis.

So, yes, crypto donations can be tax-deductible through an itemized deduction on your tax return if you donate your crypto to a qualified charitable organization.

How to report a crypto donation?

You can import your crypto donations into CoinTracking manually or automatically from the exchange you used to make the transaction. Currently, you can import trades from 110+ exchanges and wallets, making it easy to report donations.

If you are using TheGivingBlock, you can import your crypto donation into CoinTracking. In any case, after donating with the TheGivingBlock widget, you will automatically receive a tax receipt for your records.

Sign-up to CoinTracking today!

Trading crypto has several tax reporting requirements, including crypto donations. Please check this full guide on how to report crypto on taxes for more clarification.

How can I avoid paying taxes on bitcoin?

Donating Bitcoin or crypto is one of the best legal ways to avoid paying capital gains tax and get a tax deduction. Moreover, you can also employ crypto tax loss harvesting strategies, where you sell one of your portfolio positions at a loss to offset the gains you had in other positions.

Additionally, you can take crypto loans, hold crypto for more than 12 months to get a long-term capital gains tax rate, direct crypto to Roth IRAs or other retirement plans. Take a look at our guide on the top 7 ways you can reduce your crypto taxes for more information.

Learn how to import a crypto donation into CoinTracking:

The best crypto tax software: CoinTracking

CoinTracking covers all your crypto tax needs. With CoinTracking, you can:

  1. Import (API & CSV) your trades from 110+ exchanges/wallets.
  2. DeFi and NFT support with our ETH+DEX importer.
  3. Import your Binance Chain, Binance Smart Chain, and MATIC transactions.
  4. 25+ advanced reports, including which coins offer you a tax-free rate.
  5. Automatic capital Gains, according to 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB), accepted worldwide.
  6. Generate complete Tax Reports in your country.

If you need personalized help reviewing your trades or preparing your US tax returns, check out our CoinTracking Full Service. A team of crypto tax experts led by Sharon Yip, who helped us with this article, provides assistance for CT Full Service.

Find the best crypto tax guides out there:

  1. DeFi taxes: The complete guide.
  2. 2021’s NFT guide (with taxes).
  3. Is Bitcoin taxable? The ultimate guide for 2021 taxes.
  4. Top crypto tax friendly countries.
  5. Do you pay taxes on Bitcoin debit cards purchases?
  6. How to reduce your crypto taxes?
  7. NFT taxes: The ultimate guide.
  8. How to calculate taxes with Bitcoin dollar-cost averaging?
  9. Do you pay tax on stolen, hacked, or lost crypto?
  10. FIFO for crypto taxes? Implications of accounting methods.
  11. Crypto tax loss harvesting: Here’s what you need to know

Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.

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