Cryptocurrencies are currently all the rage, right? Bitcoin is growing, paving the way for other alternative currencies to emerge. Today, there are several types of virtual money, and there’s no indication that they’re going away anytime soon. So what does that mean for you and me? Cryptocurrencies will start to pop up in unexpected places, including charitable donations.
You may have seen some virtual currency nods around your city. Bitcoin ATMs are popping up, and even several businesses are starting to accept Bitcoin as payment for goods. But perhaps one of the first indications of mainstream virtual currency use was when charities began taking it as donations. Let’s look at four ways organizations are cashing in on the trend.
What is a Donation Using Cryptocurrencies?
Believe it or not, you can donate your Bitcoin today if you want. It’s not even that difficult to do. And we can thank an IRS opinion from 2014 for it, which deemed cryptocurrencies as property rather than money. So, acting much like donating stock to charity, some organizations started to accept alternative currencies.
But it’s not just about the trends or convenience; there are exceptional tax perks when donating cryptocurrency or accepting it as a charity.
Benefits of Cryptocurrency Donations
When you, as the donor, give alternative currencies to a registered nonprofit, you receive a reasonably attractive tax benefit. Why? Go back to the 2014 IRS opinion. When you donate property, you get a better tax break than when donating money. So now that the IRS labeled cryptocurrencies as property, you get that better tax break.
Tax Break for the Donor: It’s much like donating appreciated stocks. You can buy Bitcoin at a specific value, then give it at its appreciated value. As long as you get an appraisal and have the virtual currency for over one year, your gift’s value is the appreciated figure, not the lower, original figure. So, receiving a more extensive tax break means you benefit from your contribution.
Tax Break for the Charity: Likewise, charities also benefit from these rules with appreciated property donations. The IRS won’t require the nonprofit to pay capital gains taxes because the gift is an appreciated asset — again, much like a stock donation. Typically, these organizations lose about 20% of their cash gifts through capital gains taxes. Donating cryptocurrencies bypasses that loss and means your charity receives 100% of the contribution.
How to Make a Cryptocurrency Donation
As mentioned, making a donation using cryptocurrencies to a charity is reasonably straightforward. Using apps, nonprofits can accept alternative money directly on their website. One app, in particular, BitPay, works with charities. The company will process payments for free if it’s a 501(c)(3). The way it works is that the processor liquidates the donated Bitcoins. Then, it merely deposits the value into the nonprofit’s account.
It’s truly that simple, which is why donating cryptocurrencies is gaining popularity.
4 Ways Charities Are Cashing in on Cryptocurrencies
Let’s look at four ways that organizations currently accept cryptocurrencies as donations.
BitPay is an app that anyone can use for cryptocurrency transactions. Personal users open a “wallet” with BitPay and can even receive a prepaid Mastercard that automatically converts your currency and allows you to use it anywhere. With so many cryptocurrency fans ready to take the next step into the market, charities turn to BitPay to tap into the demand.
Aside from accepting card payments, charities can use the app directly on their website, through email marketing, or on social platforms. Charities can accept these donations from multiple countries and receive the converted funds into their accounts for free. Currently, 19 different nonprofits use BitPay, including the American Red Cross.
The Giving Block
The Giving Block is an online space where charities can accept cryptocurrency donations of any value. Registered nonprofits can establish a giving page directly on their website through a widget or on The Giving Block’s website. You can donate several virtual currency types, including Bitcoin, Ethereum, Amp, Dai, Litecoin, and more.
The Giving Block accepts the alternative money and will either hold it for the charity or auto-convert it to US dollars. United Way Worldwide has a page with this company.
BitGive’s mission is to revolutionize nonprofit donations by incorporating virtual currencies. It currently works with 26 charities spanning 27 countries, including The Water Project. The organization is a nonprofit itself and already established a Bitcoin-based investment fund for public health and environmental causes.
Donating cryptocurrencies is more transparent than cash. With that in mind, BitGive’s platform helps nonprofits complete their work without restrictions by providing direct and transparent donations and communication. The organization shares financial information and real-time project results between donors and charities.
Fidelity Charitable Foundation
Fidelity Charitable Foundation works similarly to BitGive, but it accepts all currencies, not just virtual money. But what sets it apart from the others is that you can donate Bitcoin to almost any charity. The foundation accepts a wide range of cryptocurrencies, including Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
Another perk with Fidelity is that it helps you through the appraisal process, which is essential when donating large sums.
When to Donate Cryptocurrencies?
One important aspect of cryptocurrency donations is the timing of your gift. This information is also essential for charities to understand because nonprofits can help donors make the most out of their contributions. The IRS issues tax deductions based on how long the donor held the “property” (the cryptocurrency). There are two categories: less than a year and more than a year.
If you donate bitcoin that’s more than one year old (from the date you bought or received it), then you and the charity will most likely receive the full fair market value of the donation. Again, this is similar to donating appreciated stocks. It’s also how you receive those benefits mentioned above.
So, try to wait at least one year before donating cryptocurrency because virtual money that’s less than a year old won’t receive the same value. Instead, it’s only worth the original value (how much you paid for it or the value when you received it). When you donate, the gift and tax benefits reflect either the original or present-day value, whichever is less.
It’s vital to plan for donating cryptocurrencies for these reasons.