By Anthony Diosdi
Over the past two years cryptocurrency donations have greatly increased. This article will discuss the tax rules governing donating cryptocurrency and why it may be more preferable to donate cryptocurrency to a qualified charity than cash. Investors may find it far more beneficial to donate cryptocurrency to a public charity or a private foundation because the donated crypto asset may be eligible for a charitable deduction at its fair market value instead of its basis. This is consistent with the Internal Revenue Service’s classification of cryptocurrency as an intangible personal property similar to stocks and bonds. Calculating the value of cryptocurrency being donated to a public charity or foundation depends on the holding period of the donor. If the donor holds the cryptocurrency for one year or longer, then the value of the contribution is equal to the current fair market value of the cryptocurrency. However, if the donor holds the donated cryptocurrency for less than one year, the value of the contribution for income tax deduction purposes is the lesser of the donor’s adjusted basis or current fair market value of the cryptocurrency.
A cryptocurrency donor must be prepared to substantiate his or her contribution to a qualified charitable organization. This means a donor can deduct a charitable contribution of $250 or more if the donor has a written acknowledgement from the charitable organization. The donor must get the acknowledgement by the earlier of:
1) The date the donor files the original tax return for the year the contribution is made, or
2) The due date, including extensions, for filing the return.
The donor is responsible for requesting and obtaining the written acknowledgement from the donee.
If you are considering donating cryptocurrency to a public charity or a private foundation, you should consult with a qualified tax attorney.
Anthony Diosdi is one of several tax attorneys and international tax attorneys at Diosdi Ching & Liu, LLP. Anthony focuses his practice on international and domestic tax planning. He advises multinational companies, closely held businesses, and individuals on a host of complicated tax matters. Anthony has authored numerous articles on international and domestic tax planning.
Anthony Diosdi is a frequent speaker at international tax seminars. Anthony Diosdi is admitted to the California and Florida bars.
Diosdi Ching & Liu, LLP has offices in San Francisco, California, Pleasanton, California and Fort Lauderdale, Florida. Anthony Diosdi advises throughout the United States. Anthony Diosdi may be reached at (415) 318-3990 or by email: firstname.lastname@example.org.
This article is not legal or tax advice. If you are in need of legal or tax advice, you should immediately consult a licensed attorney.