IRS memorandum released January 13, 2023 verifies all cryptocurrency donations over $5,000 require a qualified appraisal by a qualified appraiser. A cryptocurrency donation directly to a charity avoids an IRS tax on unrealized capital gains. The donation deduction is the fair market value of the cryptocurrency donated provided the coin donated has been owned for more than twelve months.
Cryptocurrency is property not stock
The IRS memorandum reinforces cryptocurrency is property and not stock. Stock donations can be listed on IRS 8283 at any amount without appraisal. Cryptocurrency donations are donations of property so a qualified appraisal is required for donations over $5,000. The IRS Form 8283 with the qualified appraiser’s signatures is required to be filed with the donor’s personal IRS tax filing.
Are all cryptocurrency types considered property?
Yes all direct cryptocurrencies donations are property donations. Stable coins with values set to the US dollar are still property donations and require appraisals for donations over $5,000. Tether, USDC and Dai are all stable coin cryptocurrencies that the IRS has consistently called property. Bitcoin has a readily accessible value on multiple exchanges. Ethereum is constantly trading. Ethereum and Bitcoin are property when donated per the IRS. NFTs (non fungible tokens) are property when donated per the IRS. Unique NFTs may be considered art donations depending on their attributes.
When are appraisals required to be done?
Appraisals can’t be done before donation because of the volatility of prices. Appraisals must be done before the IRS tax return claiming the property donation over $5,000 is filed. If appraisals aren’t done by tax filing deadline then a tax extension needs filed or if at final extended deadline then the donation should not be claimed and an amended IRS tax return can be filed claiming the donation can be filed once the cryptocurrency appraisal has been completed.
Randy Tarpey CPA