Key takeaways:
- Donating assets held for over a year eliminates the capital gains tax you would owe if you sold them first.
- For itemizers, you can only deduct the portion of total annual giving that exceeds 0.5% of your Adjusted Gross Income (AGI).
- IRS thresholds are based on your total noncash gifts for the year. If your combined donations (e.g., Bitcoin + stocks) exceed $5,000, a qualified appraisal is required.
Sometimes, the tax deduction for a strategic cryptocurrency donation can actually outweigh the liability of a sale. Before you click “send” to your favorite nonprofit, consider these five items to ensure your gift is optimized.
1. Understanding the Deduction Limits
The IRS treats cryptocurrency as property. Your charitable deduction for donated property is generally limited to 30% of your Adjusted Gross Income (AGI) when giving to public charities.
New for 2026: Under the “One Big Beautiful Bill Act,” you can only deduct the portion of your total annual giving that exceeds 0.5% of your AGI. If your AGI is $200,000, the first $1,000 of your donations will not produce a tax benefit.
2. Confirming “Qualified Organizations”
To receive a deduction, you must give to a qualified organization, such as a church or a 501(c)(3) public charity. Political organizations and most private individuals do not count.
Additionally, you will always want the charity’s development or fundraising associate to check the charity’s Gift Acceptance Policy. Some nonprofits are not yet equipped to handle digital assets or may require that all crypto be liquidated
immediately upon receipt.
3. The Power of Donor-Advised Funds (DAFs)
If your favorite small charity can’t accept crypto directly, a Donor-Advised Fund (DAF) is a potential workaround. You donate your crypto to the DAF (a sponsoring 501(c)(3) organization), receive an immediate tax deduction, and then “advise” the fund on which charities should receive the cash proceeds later.
Note, you might have to interview a few sponsoring organizations to confirm they can hold an invest your specific type of cryptocurrency.
4. Holding Periods and Valuation
Timing is everything in tax planning.
- Long-Term (Held > 1 Year): You can generally deduct the Fair Market Value of the cryptocurrency on the day of the gift and avoid all capital gains tax.
- Short-Term (Held ≤ 1 Year): Your deduction is limited to the lesser of your cost basis or the fair market value.
5. Filing Form 8283 and Appraisals
Large crypto donations trigger additional paperwork. The IRS uses aggregate amounts for these thresholds:
- Over $500: You must file Form 8283, Section A.
- Over $5,000: You must obtain a qualified appraisal from a third party and complete Section B, which requires a signature from the charity.
- Over $500,000: You must attach the full qualified appraisal to your tax return.
Donating cryptocurrency isn’t quite as simple as dropping clothes off at a bin, but the U.S. tax code highly encourages it. By doing a little planning now, you can make a massive impact on your favorite cause while keeping more of your hard-earned gains.
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.
