Cryptocurrency donations to charity are booming, with gifts still rolling in as the calendar winds down.
Investors may still bypass capital gains taxes on profitable assets, and score a write-off for 2021 if they itemize deductions.
However, there are things to consider before transferring crypto to charity, experts say.
Cryptocurrency donations to charity are booming, with gifts still rolling in as the calendar winds down.
There was a 583% increase in digital asset donations in 2021 compared to 2020 on Crypto Giving Tuesday, a campaign started by The Giving Block, a crypto donation and fundraising platform for nonprofits and individuals.
On Crypto Giving Tuesday 2021, the Washington, D.C.-based company processed $2.4 million in gifts, with an average donation of $12,600, according to the company, and giving has continued into the holiday season.
That day has inspired hundreds of conversations with high-net-worth donors, companies and projects that want to make gifts,” said Pat Duffy, co-founder of The Giving Block.
And other companies have seen similar growth in digital currency philanthropy.
“We’ve seen a spike with nearly a five-fold increase from 2020 to 2021,” said Tony Oommen, vice president and charitable planning consultant of Fidelity Charitable, a 501(c)3 organization that accepts digital currency through its donor-advised fund, a charitable investment account for future gifts.
Part of the reason may be some assets’ unprecedented growth over the past year, he said. For example, the price of bitcoin has risen nearly 70% since the beginning of 2021.
Some digital currency has a security feature known as “whitelisting,” which only permits withdrawals to go to designated addresses, Duffy explained, and adding these permissions may take a few days.
“If you want your crypto donation to reduce tax liability for 2021, you should be whitelisting addresses now,” he suggested.
And while an increasing number of non-profits are accepting cryptocurrency, if a preferred charity doesn’t, donors may use a third-party platform to make the gift.
“A donor-advised fund can be used in the front end to process the gift and convert it to cash so the charity can use it for their mission,” Oommen said.
Moreover, someone making a larger gift may use a platform for personalized services, such as guidance on approved nonprofits, tax guidance and appraisals.
Some digital currency has a security feature known as “whitelisting,” which only permits withdrawals to go to designated addresses, Duffy explained, and adding these permissions may take a few days.
“If you want your crypto donation to reduce tax liability for 2021, you should be whitelisting addresses now,” he suggested.
And while an increasing number of non-profits are accepting cryptocurrency, if a preferred charity doesn’t, donors may use a third-party platform to make the gift.
“A donor-advised fund can be used in the front end to process the gift and convert it to cash so the charity can use it for their mission,” Oommen said.
Moreover, someone making a larger gift may use a platform for personalized services, such as guidance on approved nonprofits, tax guidance and appraisals.
