How donating bitcoin and other cryptocurrencies directly to charity can be tax efficient and potentially increase the size of your gift
Bitcoin and other cryptocurrencies can be donated to charity, just like other appreciated assets such as stocks and business interests. Before you sell bitcoin and donate the after-tax proceeds, consider donating your bitcoin directly to charity, such as a Fidelity Charitable donor-advised fund. This strategy includes two significant benefits, both for you and the charity:
There’s another upside to donating bitcoin to a public charity with a donor-advised fund program such as Fidelity Charitable: after you have made your philanthropic bitcoin contribution, the bitcoin is sold and the funds are deposited into your donor-advised fund. You can then recommend how the funds are invested—allowing it to potentially grow tax-free—before recommending it as a grant to charities.
Many charities are not able to accept direct donations of bitcoin, so using a donor-advised fund such as the Fidelity Charitable Giving Account is a great way to donate these assets and support the charities you love. Fidelity Charitable can accept your bitcoin donation, allowing you to claim the tax deduction, and then you can recommend a grant to your favorite 501(c)(3) charity.
Did you know?
Fidelity Charitable accepts bitcoin, bitcoin cash, ethereum and litecoin.
Donating cryptocurrency, like bitcoin, to a Fidelity Charitable donor-advised fund may eliminate capital gains taxes and 100% of the value can support the charities of your choice by recommending a grant. Charities are exempt from paying capital gains when they accept cryptocurrencies, so the full value of your gift stays intact. Consider this example:
Original purchase price: $300,000
Federal long-term capital gains rate: 23.8%1
Donate bitcoin valued at:
$1,100,0002
Long-term capital gains tax paid:
-$190,400
$0
Charitable contribution/your charitable deduction:
$909,600
$1,100,000
Additional amount dedicated to charity:
$190,4003
1This assumes all realized gains are subject to the maximum federal long-term capital gains tax rate of 20% and the Medicare surtax of 3.8%. This does not take into account state or local taxes, if any.
2Amount of the proposed donation is the fair market value of the appreciated property held more than one year that you are considering donating as determined by a qualified appraisal.
3Tax basis assumed to be $300,000. If you sold the bitcoin for $1,100,000, you would have $800,000 in capital gains and would pay $190,400 in tax.
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