Crypto Philanthropy: A Tax-Savvy Way to Make a Difference

In the rapidly evolving world of cryptocurrency, one trend that's gaining significant traction is the use of crypto donations for charitable causes. As digital currency investors seek to maximize their tax breaks and impact, crypto donations to charity are skyrocketing. Here's why this strategy can be 'hugely beneficial' for both donors and charities.



According to Fidelity Charitable, a public charity that accepts bitcoin, ethereum, and litecoin, crypto donations have surged recently. In 2024, the organization received $688 million in crypto donations through November 19, a staggering increase from $49 million in all of 2023. This trend is driven by investors eager to take advantage of the tax benefits associated with crypto donations.

For donors who itemize their deductions, it's generally a better strategy to donate profitable assets like cryptocurrency or stocks, rather than cash. By gifting appreciated investments, donors can avoid triggering capital gains taxes, saving money for both themselves and the charity. Additionally, donors can deduct the asset's fair market value if they've owned it for more than one year, with a cap of 30% of their adjusted gross income for public charities.



One of the primary advantages of crypto donations is the ability to avoid capital gains tax on the appreciated amount. Given the volatility of crypto markets, this can result in substantial tax savings for donors. Moreover, donors can claim a tax deduction for the fair market value of the donated crypto, maximizing their charitable impact while minimizing their tax liability.

Crypto donations also offer long-term financial benefits for both donors and charities. Cryptocurrencies' volatility can lead to significant appreciation over time, allowing for larger charitable gifts without incurring capital gains tax. Charities, in turn, benefit from accessing tech-savvy, younger donors who prefer digital assets, potentially leading to increased donations and diversified funding sources.

However, navigating the complexities of cryptocurrencies and their volatility requires careful management. Charities can mitigate price fluctuations by utilizing intermediaries that instantly convert crypto donations to fiat currencies. Additionally, they can diversify their crypto portfolio to include stablecoins, which have lower volatility, ensuring consistent donation values. By partnering with crypto processing services, charities can ensure secure storage and regulatory compliance while educating staff and volunteers about the intricacies of digital assets.

As the crypto ecosystem matures, non-profits should consider accepting digital assets to stay competitive and attract a wider range of donors. By doing so, they can reach new donors, reduce transaction fees, and expedite transactions, maximizing the impact of their crypto donations.

In conclusion, crypto donations are a tax-savvy and effective way for donors to support their favorite charities while minimizing their tax liability. For charities, embracing crypto donations can lead to increased donations, diversified funding sources, and a wider range of tech-savvy donors. As the popularity of cryptocurrencies continues to grow, so too will the role of crypto philanthropy in the charitable sector.