With the massive increase of popularity in cryptocurrency the past year, many crypto investors ended 2021 with large gains and may be wondering how to reduce their future taxes. According to a survey conducted by Fidelity Charitable, “More than half of crypto investors said they weren’t sure whether they could donate crypto assets to charity.” By donating these assets to charity, you can both minimize your tax bill and contribute to a good cause.
Not all charities can accept cryptocurrency, so be sure to research this prior to making your decision. A donor advised fund or third party processor may be required as well. This option can be incredibly useful for organizations working in countries where it is difficult to access resources or without reliable banking systems. Many organizations and charitable programs now use the blockchain, including the United Nations World Food Program, to make it easier to obtain money for food and necessary items.
If you are interested in donating some of your crypto assets, there are a few questions to consider. The first being, which charities accept cryptocurrency donations. A few well-known nonprofits that accept crypto include the Salvation Army, Susan G. Komen, Toys for Tots, and Save the Children. There are also websites such as Every.org which connect crypto donors and charities. Another question you may want to consider is if you need to have your crypto appraised before donating. Since cryptocurrency is classified as property, donations over $5,000 in value must obtain an independent, third-party qualified appraisal of the value of the cryptocurrency donated. This is to verify the tax deduction the donor will claim on their tax return for the year donated. Third, do you qualify for the tax benefits you are seeking, as there are requirements that need to be met.
We have extensive experience with charitable donations and expertise in every aspect of estate planning and asset protection. Call Tresp Law, APC today at (858) 248-2779 or email us here.
