Things to Consider When Giving Crypto to Charities or Others

United States Congress has increased tax benefits for U.S. people who regularly give donations. Different people give different types of donations and after the charity, their main focus is towards their tax position. Are you willing to give cryptocurrency as a donation? Here are some of the important things that you should know before you do so.

What Should You Give As A Donation?

Giving and receiving crypto does not include taxable situation for both ends. If you want to give crypto as a donation then you should decide which asset of crypto you should donate. If you donate a low tax basis asset can reduce future taxable income.

The recipient of the charity is not always exempt from the U.S. tax. If they’re not exempt from the tax, they will give crypto as a non-charity on the lowest tax basis. If they want to convert their gift into a non-charity that has high benefits then they prioritize crypto with high tax basis.

Can A Crypto Gift Give You A Loss?

More often than not, if the crypto asset is being received as a donation, then it can be a loss of the recipient. Due to the nature of cryptocurrency, its tax basis is higher than its market price. A donor should sell his crypto for cash and then give that cash for a charity or non-charity purpose.

A crypto gift that has in-built loss can be cancelled if it is given for a non-charity purpose. It happens because the donor’s tax basis does not apply to the recipient in case of built-in loss crypto asset.

Charitable Deduction On Crypto Gifts

Unmarried and married taxpayers are entitled to tax deductions on a single payment of $12,400 and $24,800 respectively. Even if this threshold is not achieved, a taxpayer can still apply for a charitable tax deduction up to $300. Often the deduction is based on the current market value of the crypto asset.

What If The Charity Or Non-Charity Unit Does Not Accept Crypto?

Many renowned charities are accepting crypto as a payment option. But according to a report, only 2% of charitable organizations are doing so in the country. But if the charity of your choice does not accept crypto asset as payment then you can pay them through a donor fund.

A donor-advised or donor fund accept payment in cryptocurrency. Fidelity Charitable is one of the largest donor funds in the U.S. It accepts payment in Bitcoin, Ether, Bitcoin Cash, XRP, and Litecoin.

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