As the year-end rolls around many individuals are faced with the question of how to best support their favorite charities, while also offsetting their tax burden. People tend to reach for their credit card first, but donating appreciated assets like cryptocurrency or stocks can be a much more tax-efficient way to support your favorite cause.
When non-cash assets are donated directly to nonprofits, donors not only receive a larger deduction, but the nonprofit also receives a larger donation.
How does donating crypto or stocks directly compare to selling your cryptocurrency or stocks and then donating the cash proceeds? If you sell your appreciated cryptocurrency, most countries require that you pay capital gains on the appreciated amount which can often range from 20-30%. That means if you sell your asset first, you’re donating the after-tax proceeds, resulting in a smaller donation.
Before we start – here are some terms you need to know:
- Capital Gains Tax: a tax on the profit realized on the sale of an asset.
- Fair Market Value: the price that an asset would sell for on the open market.
- Cost Basis: the original value of an asset for tax purposes, usually the purchase price.
Below we will break down how and why you should donate assets like cryptocurrency, stocks, real estate, and art.
How Can I Donate Cryptocurrencies Like Bitcoin to Charity?
In the U.S., the IRS classifies cryptocurrency as property. Similar to other property donations, that means the donor does not have to pay the capital gains tax they would otherwise owe on their appreciated crypto. That lowered tax burden can often mean a 20% larger donation that the donor can make to their favorite charity.
In addition to the reduction of your capital gains, if the appreciated crypto that you donate was held for more than one year and you itemize your charitable deductions, you can typically deduct the fair market value of your donation, up to 30% of the adjusted gross income with a five-year carryover.
It’s possible to donate bitcoin and dozens of other cryptocurrencies to thousands of charities. Browse nonprofits by name or cause to find your favorite organization to support with crypto donations.
How Can I Donate Publicly Traded Securities and Stocks?
Giving appreciated stock is up to 20% more tax-efficient than cash at zero additional cost to you. Donating stock directly, rather than selling appreciated shares first, protects capital gains tax. This means a higher tax deduction for you, and the nonprofit can receive the full value of your donation—keeping the most money going directly to charity. It’s a win-win-situation.
Appreciated securities that have been held for over a year are eligible to deduct at fair market value instead of cost basis, which allows for higher deductible amounts. This also will not trigger capital gains tax.
Not only are you able to give more to charity, but donating stocks is a highly efficient process. The Giving Block makes it easy to support your favorite nonprofits with stock donations and for nonprofits to accept with no additional headcount or operational lift required. In a few simple clicks through The Giving Block’s Donation Form, you can donate appreciated stock directly to thousands of nonprofits.
How Can I Donate Real Estate to Nonprofits?
Holding onto highly appreciated real estate for over a year? Consider donating it to a Donor-Advised Fund or charity, especially if the property is easy to liquidate, market, and is debt-free. This will avoid triggering the capital gains tax and allow for fair market value tax deduction for the donation.
It is imperative to value your property accurately, before donating directly to nonprofits. If your property is worth more than $5,000 it must be appraised by a qualified appraiser. If the deduction is greater than $500,000 the appraisal must be attached to your tax return.
If the real estate market is down but your property still holds great value, donating your real estate directly to nonprofits is a great way to divest yourself of the property. As always, consult your tax advisor if you are interested in donating property to a nonprofit.
How Can I Donate Art & NFTs to Charity?
Not only have non-fungible tokens (NFTs) captured worldwide attention, they’ve also become a viable revenue stream for nonprofits. In the last few years, organizations have received the proceeds from NFT sales, were the recipients of NFT auction proceeds, and more.
While it’s not recommended that nonprofits receive the NFT itself, there are multiple ways NFT creators and collectors can support nonprofits. Organizations can also create and sell their own NFT collections thanks to an innovative partnership between RareCircles and The Giving Block.
If you have a physical piece of artwork you’d like to donate to a nonprofit, the fair market value of the artwork must be determined, similar to real estate. If it’s worth more than $5,000 it must be appraised by a qualified appraiser. To get a deduction equal to the fair market value of the work, it must be donated to a public charity or private operating foundation with the anticipation that the charity will be able to use the work “related” to its exempt purpose.
The most difficult part of donating art to charity is filling out the related-use requirement. Related use means that the art donated directly to the nonprofit is being used in line with their mission. For example, you can donate a painting to an art museum to be used as an educational tool.
Why Are Direct Asset Donations Better for Nonprofits?
The bottom line is that donating assets directly to a nonprofit is better for the nonprofit and the donor. The donor avoids the capital gains tax and gets a larger deduction while the nonprofit can retain the full amount since they are a tax-exempt organization.
Whether you donate crypto, stocks, or another type of non-cash asset, you have multiple options to support the causes you care about. Make a donation today and save on your taxes as you also maximize your impact.
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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.