How to Donate Bitcoin to Help Kids and Lower Your Tax Bill

You’ve probably been seeing more and more news about cryptocurrency lately, with people buying cars using bitcoin and some wealthy philanthropists donating as much as $1 billion in crypto to global COVID-19 relief.

Here’s everything you need to know about why and how to donate bitcoin and other cryptocurrencies to fight poverty and reduce your tax bill.

Why Donate Cryptocurrency?

With over 30 million users in the U.S., crypto is quickly gaining mainstream acceptance. It can now be used to pay for everyday purchases like clothing, coffee and airline tickets.

More recently, it is also being used for fundraising and as a tax-efficient way to directly support charitable causes, including Compassion’s fight against global poverty. Over $300 million in crypto was donated to nonprofit organizations in the U.S. last year, and this amount is expected to have grown severalfold in 2021.

“Donating with crypto is really easy, and it’s gratifying to know that I’m helping the ministries I care about while also enjoying the tax benefits,” says Robert Briggs, a Christian crypto donor. “I believe that long term, cryptocurrency will be an incredible growth catalyst for both donors and ministries.”

Because the IRS classifies cryptocurrency as an asset (similar to stock investments), choosing to donate it will avoid capital gains taxes and may lower a donor’s overall tax bill. When you donate bitcoins or other cryptocurrency to charities, your gift is tax deductible if you provide your email address. (Read our cryptocurrency FAQ.)

Moreover, because bitcoin donations aren’t taxed, charities like Compassion receive the entire value of the asset — helping to end the injustice of children living in poverty and ultimately providing for maximum impact of your asset.

5 Things to Keep in Mind Regarding Crypto Donations and Taxes

• First, to claim a tax benefit for 2021, all donations must be processed no later than Dec. 31.
• Second, to claim a tax benefit, it is important to have a tax receipt from the receiving charity — including the name of the donor, the date of the contribution, the crypto amount donated, as well as the nonprofit’s address and employer identification number (EIN).
• Third, if donating more than $500 worth of bitcoin or other tokens, you will need to file IRS form 8283 (necessary for all noncash charitable contributions above this threshold).
• Fourth, if donating more than $5,000 worth of bitcoin or other tokens, a third-party appraisal is required in addition to form 8283. This is a different process compared with donating publicly traded stocks. But it has recently become much easier to do, with many companies offering the service for as little as $120.
• Finally, similar to stock donations, there is an important distinction for tax purposes between crypto holdings that are short-term versus long-term investments (held for longer than 12 months). Only donations of long-term crypto holdings will be able to take advantage of the full market value of the holding. Short-term holdings are only eligible for a deduction of the cost basis.

Choosing Where to Give

The most important consideration here is, of course, giving to the cause and organization that you are passionate about. A few other considerations are:

1. Ensure that your organization of choice accepts crypto donations. The easiest way to do so is to reach out to them directly, but other third-party sites like Engiven, the crypto-donation management tool Compassion uses, or The Giving Block can assist with identifying nonprofits that accept crypto.
2. Make sure the organization can accept your cryptocurrency of choice — many accept Bitcoin (BTC), Bitcoin Cash (BCH) and Ethereum (ETH). But some do not yet accept coins like Cardano (ADA) or Gemini Dollar(GUSD).
3. Finally, check to see if your selected nonprofit allows flexibility with how to apply your donations (e.g., allowing you to specify to more than one fund or use).

By partnering with the crypto-donation management tool Engiven, Compassion can accept the 39 most prevalent cryptocurrencies — from Bitcoin and Ethereum to Dogecoin (DOGE), Litecoin (LTC), Binance Coin, Zcash (ZEC), Basic Attention Token (BAT), Ox (ZRX), UMA (UMA), The Graph (GRT), Dai (DAI), AMP (AMP) and Storj (STORJ).

Giving cryptocurrency to Compassion was “a win-win” for donor Wally Tsuha.

“Compassion International has an incredible mission that impacts the lives of so many children around the world,” Wally says. “My cryptocurrency donation reflects my heart for supporting Compassion’s efforts while receiving the tax benefits that donating appreciated crypto can provide. It’s a win-win, and I’m so thankful that Engiven now enables me to support Compassion International.”

Compassion has made it easy for you to decide how to best allocate your cryptocurrency donations. Whether you’re hoping to get involved in water projects, earthquake relief or other specific causes, you can designate your bitcoin donation to go to one of four funds: Unsponsored Children’s Fund, Clean and Sanitary Water, Where Most Needed or Disaster Relief.

Note: Your tax situation may differ based on your personal circumstances. We recommend to still consult a tax professional who is familiar with crypto donations before making key decisions.

Learn how to donate bitcoin to Compassion!

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