Cryptocurrency Donations: Embracing the Future of Philanthropy

Cryptocurrency has seen a resurgence in popularity, as spotlighted in a recent podcast episode from The New York Times’ “The Daily.” This resurgence has sparked new interest in making philanthropic donations using cryptocurrency, otherwise known as crypto donations.  

Crypto donations can be an innovative way for philanthropists to accomplish their individual philanthropic goals. They can work with their professional advisors and the Community Foundation Tampa Bay to create a giving strategy for their crypto donation with tax advantages and lasting impact.  

Regulatory changes open door

After the bankruptcies of cryptocurrency platforms like FTX, the Securities and Exchange Commission enacted significant changes in the cryptocurrency market. These regulations aimed to enforce anti-fraud and securities laws, prevent fraud, reduce market manipulation and ensure greater transparency among cryptocurrency holders and exchanges.

In May 2024, the SEC approved the first exchange-traded funds that hold bitcoin, marking a significant shift towards widespread acceptance of cryptocurrency. Previously, funds could only gain exposure to crypto through derivatives like futures contracts.

The SEC’s decision paved the way for investment companies to offer Bitcoin Exchange-Traded Funds (ETFs) as an investment product. It also allowed publicly traded funds to directly hold cryptocurrencies. These new SEC guidelines clarify cryptocurrency classification and handling, opening the door for crypto donations.

These regulatory changes create a more secure and transparent environment for cryptocurrency transactions, which benefits people who want to donate cryptocurrency.

Cryptocurrency Works for Philanthropy

As cryptocurrency begins to be seen as an investment product, it becomes part of the portfolio that can be considered for philanthropic donations, much like gifts of stock, appreciated assets and other non-cash gifts. The Community Foundation Tampa Bay routinely accepts non-cash gifts, including cryptocurrency donations.

With gifts of cryptocurrency, you can support your favorite charities, expand your impact and potentially reduce your tax liabilities. At the Community Foundation Tampa Bay, we believe there should be a personal plan for strategic philanthropy.  

Any size of cryptocurrency donation is accepted at the Community Foundation Tampa Bay. Crypto donations can be used to fund a variety of giving vehicles, including:

• Donor Advised Funds: Make an initial donation, claim maximum tax benefits and decide which nonprofits to support.
• Scholarship Fund: Support education by setting up a scholarship fund that benefits students.

• Critical Needs: Address urgent, unexpected needs of nonprofits through the Critical Needs List.

As you’re planning for the transaction, consider how cryptocurrency fits into your overall charitable giving strategy.  

How to Donate Cryptocurrency

Planning is crucial for making crypto donations. Start talking with your professional advisors and the Community Foundation to express your interest in donating crypto. These early conversations will provide clarity on the steps to make your crypto donation and ensure a smooth giving experience.

As part of the planning process, set aside a budget to obtain an appraisal on your cryptocurrency donation. Donations expected to be valued over $5,000 require a qualified appraiser to complete an appraisal. It is best to select an appraiser prior to making the gift so that you have a plan in place. The philanthropy experts at the Community Foundation Tampa Bay can provide a list of recommended appraisers for crypto donations.

It’s worth a modest investment in an appraisal as a qualified appraiser creates an accurate valuation for the required IRS Form 8283. This form is used to report information about non-cash charitable contributions when the amount of their deduction for all non-cash gifts is more than $500.

Advantages of Crypto Donations

Crypto donations through Community Foundation offer advantages for philanthropists. These non-cash gifts combine modern financial technology with strategic philanthropy.  

Donating cryptocurrency allows you to potentially avoid capital gains tax while supporting causes you care about with a non-cash asset. Each tax situation is different, so it’s important to talk with your professional advisors to see what might be right for you.

Generally, crypto donations can offer the following tax advantages to donors:

• Capital gains tax: Crypto gifts held over a year can deduct fair market value, up to 30% of Adjusted Gross Income (AGI).

• Donation of non-cash assets: Appreciated crypto can yield double or even triple the tax benefits compared to cash gifts.

• Donation potential: Crypto appreciation allows for larger contributions; e.g., a $1,000 crypto purchase could become a $1,500 gift.

Tax advisors and accountants can maximize your tax advantages, while the Community Foundation ensures your crypto donation has a maximum benefit for the nonprofits and causes you want to support.  

As cryptocurrency evolves, lean on your professional advisors and the Community Foundation Tampa Bay to explore how to incorporate cryptocurrency in your philanthropy strategy. Reach out to our philanthropy team to discuss how to make a gift of cryptocurrency.

Nicolette Rea, J.D. is Associate Counsel and Director of Donor Relations at Community Foundation Tampa Bay. She combines her legal background with her passion for nonprofits to provide donors, fundholders and professionals advisors with a comprehensive giving experience.