Tax Deductions for Crypto Donations

Andrew Perlin
ByAndrew Perlin, CPAReviewed byZac McClure, MBAUpdated on May 20, 2024 · minute read
VerifiedExpert verified

TokenTax content follows strict guidelines for editorial accuracy and integrity. We do not accept money from third party sites, so we can give you the most unbiased and accurate information possible.

  • Donations of cryptocurrency to a tax exempt organization are not subject to capital gains taxes and may be deducted from your overall gross income. 

  • To ensure you don’t trigger capital gains taxes, send your crypto gift directly to its charitable recipient. Do not cash out or convert it to another coin. 

  • You will need to provide substantiation of your donation from the recipient, as well a qualified appraisal if your donation is worth more than $5,000.

  • Consult a tax professional for guidance about cryptocurrency donations over $5,000, particularly if you have donated an NFT.

Donating to deserving organizations is a noble cause, but it also lowers your crypto tax bill. Back in 2020, the IRS confirmed that charitable donations of cryptocurrency are not subject to capital gains taxes and, in some cases, can be deducted from one’s gross income.

However, while some donations are relatively easy to report on crypto taxes, others can get quite complicated. Read on to learn more about crypto donations and how to report them to receive tax deductions. 

Lower your tax bills by donating cryptocurrency 

If you transfer cryptocurrency directly to a charity, the donation is not subject to capital gains taxes and it can be deducted from your overall gross income. This can amount to quite a bit of tax reduction. 

For example, imagine you donate $20,000 of BTC to Save the Children, one of the growing number of charities accepting cryptocurrency donations. If you had originally acquired the BTC for $15,000 more than a year before, under normal circumstances you would have to pay taxes on $5,000 of gains. Not the case if you donate the BTC to a charitable organization or nonprofit. 

What’s more, provided conditions are met, you can deduct the donation from your overall gross income, lowering your taxes in a second way. The caveat here is that the amount of the deduction is limited to 30% or 50% of your income, depending on the type of organization you are donating to. Note that the IRS’s temporary suspension of charitable deduction limits is not applicable to non-cash donations.

To ensure your donation is eligible for tax benefits, make sure you’ve met the following criteria: 

  • You have held the donated asset for more than a year 

  • You confirm the intended receiver of the funds is considered a tax-exempt organization by the IRS 

  • You donate the cryptocurrency directly to the organization without cashing it out or converting it to a different coin. Both of these actions are crypto taxable events. Platforms like The Giving Block and Endaoment can facilitate crypto donations directly to a charitable organization.

Hold assets you plan to donate for more than a year 

If you are donating crypto that you have held for less than a year, it will still be subject to short-term capital gains taxes, which are reported on Schedule D of Form 1040. 

Additionally, you will only be able claim a deduction for the asset’s cost basis. For example, if you purchased 1 BTC for $25,000 and donated that BTC 8 months later when it was worth $33,000, you could only claim the $25,000 deduction. 

For these reasons, it is wise to hold assets you plan to donate for longer than a year.

Reporting your crypto charitable donation 

The processes and substantiation stipulations for reporting long-term crypto charitable donations vary by the size of the donation. However, no matter the amount of the donation, you will only be able to deduct it if you choose to report itemized deductions and not take the standard deduction. 

Crypto donations under $250 

If your crypto donation is worth under $250, you will report your donation on your Form 1040 Schedule A, under Itemized Deductions. 

You will need a receipt from the recipient organization that shows its name and address, the date of the donation, and the amount of the donation. 

Crypto donations up to $500

If your crypto donation is worth between $250 and $500, you will still report your donation on your Form 1040 Schedule A, under Itemized Deductions. However, you will need more documentation to substantiate it. 

You will need to obtain what is called a “contemporaneous written acknowledgement” of the donation from the recipient organization. This document must: 

  • Be in writing

  • Include a description of the cryptocurrency donated, including an estimate of its FMV 

  • Note whether or not the donor received any goods or services in exchange for the donation 

  • Be received by the donor before they file their tax return or before the tax deadline 

Crypto donations over $500

For donations over $500, you will need to report the sum on Form 8283 Section A, Noncash Charitable Contributions. Substantiation requirements remain the same as those for donations over $250.

Crypto donations over $5,000

For donations over $5,000, you will need to report the sum on Form 8283 Sections A and B, Noncash Charitable Contributions. Substantiation requirements are the same as those for donations over $250, except you must also include a qualified appraisal of the donation’s value. 

Appraising the value of a crypto donation

Exchange-traded coins 

Most crypto donations under $5,000 will be valued and reported at the asset’s spot value at the time of its donation. It’s simple: if you donated 1 ETH when Ethereum was trading at $3,000, you would report its fair market value as $3,000. 

However, if you donate more than $5,000 worth of crypto, you will have to contact a qualified appraiser to sign off on its value, even if the asset is an exchange-traded coin whose value would typically be considered its spot value. At this time, the IRS has not offered guidance on who would qualify as a cryptocurrency appraiser. We recommend speaking to your crypto tax professional

NFTs

Be aware that while direct donations of NFTs to charitable organizations are not subject to capital gains taxes, any proceeds from an NFT auction are, even if they are ultimately transferred to the charity. In other words, if Coca-Cola raised 10 ETH by auctioning off an NFT, it would have to pay taxes on the asset’s proceeds, even though they were later donated to the Special Olympics. 

There is not a singular acceptable method for appraising NFT donations. As such, with more and more NFT art pieces being donated to museum collections, NFT appraisal is becoming quite a thorny issue. 

Consider: recently, an anonymous donor recently gave 262,000 NFTs to the MoMA. Because the museum’s director describes the collection as “masterpieces of the micro-period known as Late Pandemic, [that] will fill the hallowed halls of the former library with the pixels of progress,” it’s reasonable to assume it was worth a large sum. However, what is less clear is how the works would be appraised for tax purposes—or who would do the appraisal. We recommend consulting a tax professional. 

Tax deductions for crypto donations FAQs

Here are answers to frequently asked questions about tax deductions for crypto donations.

How does donating cryptocurrency affect my tax liability?

Donating cryptocurrency to a tax-exempt organization can lower your tax bill by eliminating capital gains taxes on the donation and potentially allowing for a deduction from your overall gross income. Transferring crypto directly to a charity will bypass capital gains taxes, which can result in significant tax savings. However, it's essential to meet certain criteria, including holding the donated asset for more than a year and ensuring the recipient is a recognized tax-exempt organization.

What are the reporting requirements for crypto donations of different sizes?

The reporting requirements for crypto donations vary based on the donation size. For donations under $250, a receipt from the recipient organization is typically sufficient. Donations between $250 and $500 require a "contemporaneous written acknowledgment" from the charity detailing the donation's description and value. For larger donations over $500, additional reporting on Form 8283 may be necessary, along with a qualified appraisal for donations exceeding $5,000.

How are non-fungible tokens (NFTs) treated in charitable donations?

Direct donations of NFTs to charitable organizations are not subject to capital gains taxes. However, proceeds from NFT auctions are taxable, even if the funds are eventually donated to charity. The appraisal process for NFT donations can be complex, as there isn't a standardized method recognized by the IRS. Consulting a tax professional is advisable, especially given the increasing prevalence of NFT donations and the lack of clear guidelines regarding their valuation for tax purposes.

To stay up to date on the latest, follow TokenTax on Twitter @tokentax.

Andrew Perlin
Andrew PerlinHead of Tax at TokenTax
Andrew Perlin is a CPA specializing in crypto taxes. After working as a financial controller, he co-founded CryptoCPAs, which TokenTax acquired in 2018.
Zac McClure
Reviewed byZac McClureCo-Founder & CEO at TokenTax
Zac co-founded TokenTax after his career in international finance and accounting at JPMorgan, Imprint Capital and Bain. He has worked in more than half-dozen countries and received his MBA from the UPenn Wharton School.

Get a personalized crypto tax consultation.

Complete our questionaire and we'll evaluate your situation — for free.

Let’s get started.

Check out our plans and pricing to find out which solution best meets your needs.

Review plans