The idea of a Bitcoin donation is growing in popularity. It’s not just because cryptocurrency is more mainstream — there are also undeniable perks when donating virtual money. This post will explain what those benefits are, plus recommend four of the best platforms for making Bitcoin donations. Before you know it, you may be donating your alternative currency to a charity of your choice! Or, if you’re a nonprofit, you can join the masses and start accepting these unique gifts.
Why Make a Bitcoin Donation?
Let’s start with the why. Donating Bitcoin is not the same as making a cash donation; it’s better. Not only will the nonprofit enjoy a larger gift, but the donor will also receive a significant tax benefit. It’s a win-win situation for both parties. Plus, Bitcoin isn’t currently regulated like other donations, so the process is faster, more transparent, and with less third-party involvement.
Charity Benefits of Bitcoin Donations
When you donate cash, your gift is subject to capital gains tax, which reduces the overall value. On average, this tax takes 20% away from the charity you want to support. But with Bitcoin donations or gifts of other cryptocurrencies, the nonprofit won’t lose that money.
This benefit is thanks to the IRS’s 2014 decision designating virtual currency as property, not cash. So, much like giving appreciated stocks, your gift has more punch — and the word appreciated is critical here. Bitcoin is a currency that can appreciate. So if you bought it for lower than its current value, your gift is even bigger than you realize.
Donor Benefits of Bitcoin Gifts
It’s not just the charity that receives perks. If you’re a Bitcoin donor, you walk away with a big incentive in the form of a tax break. Remember, Bitcoin appreciates, so your gift will be worth more than what you paid for the virtual currency in the first place. Therefore, your tax benefit (both federal and state) is also larger.
Let’s look at an example. Let’s say you transfer $100,000 of Bitcoin into a charity's "wallet" using one of the platforms I mention later in this article. Right away, you’d save $15,000 in capital gains federal tax. Then, you’d also receive $33,000 in refunds with the federal charitable tax deduction. Don’t forget about the state benefit. Here in Pennsylvania, donors of that amount would receive an additional $3,070 in tax benefits. So, in total, your total tax savings would be $51,070, more than half of your contribution.
Now, let’s say you purchased that Bitcoin many years ago at a value of just $40,000. Not only did you support a charity in need, but you made money, an increase of over $10,000.
When to Make a Bitcoin Donation
If you’re interested in making cryptocurrency donations to charity, there are few details to keep in mind. One is an appraisal. Because virtual currencies appreciate, you need an appraisal (just like with other appreciated gifts). The review is essential because it determines the value of your donation.
Next, consider when you bought or obtained the currency. If you wait until over a year to donate it, it'll have a higher value. That’s because cryptocurrency less than a year old is only worth whatever is less: current value or original value. If it’s over a year old, it’s worth the current value, which is typically more than the original.
Keep these details in mind as you consider cryptocurrency donations. It’s essential to plan ahead to get those fantastic tax benefits.
Four of the Best Platforms That Allow You to Make or Accept a Bitcoin Donation
So, how do you make the Bitcoin donation — or, if you’re a nonprofit, how do you accept it? As the popularity of virtual currencies grows, so do the platforms that allow you to use them. In terms of donations, there are four handy apps and platforms that help you make (or accept) the gifts.
BitPay is probably the most common platform to make and accept cryptocurrency donations. It also acts as a "wallet," and the company is planning to release a MasterCard collaboration that converts your currency, allowing you to use your Bitcoin anywhere.
To use the service, you open a wallet with the platform. If you’re a donor, you then send your virtual currency donation to your charity of choice. However, the charity also needs to establish a wallet, which is easy to do. BitPay will cover the cost for any registered nonprofits, further expanding donation opportunities and value.
A nonprofit can put BitPay directly on its website. Then, it can accept Bitcoin donations (or donations from other currencies) online through multiple marketing efforts. Think email campaigns, social media posts, etc. And because it’s an international app that converts cryptocurrency to the charity’s local currency, nonprofits can accept donations globally. Currently, BitPay supports 19 charities, including the American Red Cross.
The Giving Block
The Giving Block is an online platform that supports cryptocurrency donations for charities. Nonprofits simply register with the foundation and accept gifts two ways: either directly on The Giving Block’s website or the charity’s website via a widget. Nonprofits can accept various virtual currencies, including Bitcoin, Ethereum, Amp, Dai, Litecoin, and more.
The Giving Block is handy for both big and small charities — even United Way Worldwide has a page with the foundation. When the money arrives in the wallet, the charity can either hold it there or auto-convert it to US dollars.
BitGive is an innovative foundation striving to revolutionize nonprofit donations with virtual currencies. It knows the power of these donations and wants to make them more common. It currently operates in 27 countries, supporting 26 charities. Some examples include The Water Project, Heifer International, and Black Girls Code.
BitGive uses the transparency of Bitcoin donations to its advantage. This perk allows charities to complete projects via donations without restrictions linked to conventional cash donations. Plus, it provides direct communication with its donors so that they always know precisely where their gifts are going.
Fidelity Charitable Foundation
Although not specific to virtual currencies, Fidelity Charitable Foundation also processes Bitcoin donations, as it does with any other gift type. What makes the foundation a bit more attractive is that you can donate to almost any nonprofit. Other platforms restrict donations to those organizations registered within it. Fidelity, however, can process a gift to anyone using conversions. The foundation accepts Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
Find What Works Best for You and Starting Donating!
Although all four platforms work in similar ways, there are some differences between them. Find out what you need and what works best for you, and then go from there! Don’t forget about getting an appraisal before you donate, and ensure you have all the right paperwork for your taxes. If you have any questions, contact us. Or, check out our blogs and FAQs.