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How To Give Tzedakah By Donating Cryptocurrency

by | Sep 29, 2022

Faith-inspired giving might be one of the oldest forms of philanthropy. Dating back to 2500 BC, Ancient Hebrews implemented a mandatory tax that would be used to benefit the poor. Today, many Jewish people who do tzedakah make cash-based gifts to nonprofit organizations, especially around the High Holidays and other religious observances. But did you know that making cryptocurrency donations to a charity can also be considered a form of tzedakah? 

If you hold BTC, ETH, or another type of cryptocurrency, there are several good reasons why you might want to consider donating some of your crypto instead of cash next time you give tzedakah.

First, What Is Tzedakah?

The Hebrew word for “charity” is tzedakah, but the word more literally means “justice” or “righteousness.” While charitable giving is a common form of tzedakah, there are many other ways to do tzedakah, from cooking meals for the needy to volunteering to caring for someone who is sick. 

“Tzedakah is all about giving, connection, and changing the lives of others for the better,” says Miri Schreiber, Resource and Volunteer Development at Yad Ezra V’Shulamit, a nonprofit that feeds hungry children and families in Israel.

If you have the means to do so, donating to a charitable organization is one of the most impactful ways to do tzedakah. That’s because nonprofits often know where and how to direct funds to make a difference in the communities they serve.

Why Is Tzedakah Important to Charitable Organizations?

If you plan to give away a portion of your income as tzedakah (including your crypto gains), donating to charitable or nonprofit organizations is an effective way to make a difference.

Though you might not meet the recipient directly, your gift will be used to benefit others around you or in communities that you deeply care about.

“Tzedakah underscores so much of what we do at The Jewish Board,” says Hannah Moore, the health and human services nonprofit’s Chief Development Officer. “Tzedakah is an opportunity for donors to really participate in our work and to connect with those they might not otherwise. And, tzedakah benefits both the giver and the recipient… Tzedakah means that someone cares enough about the people that we serve and the work that we do to make an investment.”

Whether you can donate 18 USDC or 18 ETH, your gift can be the difference to those who otherwise would not have access to proper shelter, food, or other critical services.

How Much Tzedakah Should I Give?

In practice, many Jews do tzedakah on special occasions like holidays and weddings, or consider their year-end giving to be fulfilling of their tzedakah obligations. Others practice ma’sar kesafim, a 10 percent tithing that is given to help others in need.

What Are the Different Levels of Tzedakah?

Medieval rabbi and philosopher Maimonides defined the following “Eight Levels of Giving” for Jewish people, listed in order from lowest to highest:

  1. When one donates grudgingly or out of pity.
  2. When one gives less than they should.
  3. When one donates after being asked.
  4. When one gives without being asked.
  5. When one donates when the recipient is aware of the donor’s identity, but the donor doesn’t know the recipient’s identity.
  6. When the donor is aware of the recipient’s identity, but the recipient doesn’t know the source.
  7. When donations are given so that the donor and recipient are unknown to each other. (Typically, donations made to nonprofit organizations and community foundations would fall into this category.)
  8. Helping someone before they become impoverished, either by offering a substantial gift in a dignified manner, by offering a loan, or by helping them find employment so it is unnecessary for them to be dependent on others for charity.

How you do tzedakah can be informed by your religious faith but is also a deeply personal decision, based on assessing what you are able to give to those in need.

Why Should I Give Tzedakah as a Cryptocurrency Donation?

If you invest in cryptocurrency, you can also make charitable donations in crypto. Thousands of nonprofits accept donations in cryptocurrencies like Bitcoin, Ethereum, USDC and Solana.

As a kid, you may have put loose change into a tzedakah box. Now that you’re a little older, here are three great reasons to consider giving tzedakah in cryptocurrency instead of cash:

  • You already invest in cryptocurrency, have gains, and want to give back
  • You want to support nonprofits that are innovative and helping to make crypto more mainstream
  • You want to make a charitable donation in a highly tax-efficient manner

Are Tzedakah Donations Tax-Deductible?

Tzedakah donations may be tax-deductible, but it depends on your method of giving. By donating to a registered 501(c)3 nonprofit organization, your donation is likely considered tax-deductible.

It’s essential to know that many crypto donors have the added perk of being able to offset some of their capital gains tax, which is not an option for cash donors. This is because the IRS treats cryptocurrency as a property for tax purposes. Tax benefits are some of the best reasons to donate in cryptocurrency.

By comparison, it is much less tax-efficient to convert your cryptocurrency to cash and then donate it, because you will incur taxes through the currency conversion process, and therefore have less available to donate to the nonprofit of your choice.

If you want to give more, and possibly have an additional tax benefit, donating crypto is definitely worth your consideration.

(Note: This is not tax or financial advice. Please speak with a qualified tax or financial advisor.)

How Many Charities Support Crypto Donations?

Thousands of nonprofits are equipped to accept cryptocurrency donations with The Giving Block and can take dozens of cryptocurrencies, from Bitcoin and Ethereum to Dogecoin to ApeCoin. 

These crypto-friendly nonprofits work in many different cause areas, including environmental sustainability, food and hunger, and disaster relief.

Make a Difference With Crypto Donations

If you’d like to do tzedakah by donating some of your crypto, The Giving Block is your one-stop destination to find and support organizations making a positive impact on the world. Browse the names of thousands of nonprofits to see if your favorite organization accepts crypto donations, or donate to an impact index fund, which will distribute your contribution equally among participating nonprofits. 

There are many forms of tzedakah, but this year, consider making a charitable gift in crypto and help change lives for the better through the impact of Crypto Philanthropy.

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