With the tax deadline just around the corner, crypto holders are stressing over the dreaded capital gains tax. But they can write it off by donating to a worthy cause of their choice, according to one crypto-focused charity.
The Giving Block, a platform that enables nonprofit organizations to accept donations in cryptocurrency and has helped raise over $1 million to support pandemic relief efforts through its #cryptoCOVID19 campaign this year, is hoping to make it easier for taxpayers to file their returns by publishing a guide on how to donate their holdings and maybe minimize some taxes.
The group collaborated with crypto tax software TAXbit to create the guide, said co-founder Alex Wilson.
“In our opinion, most crypto users still don’t know that they can donate crypto and save money on their taxes,” Wilson said.
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According to the tax guide, which was first published last week, if a taxpayer donates cryptocurrency to a 501(c)(3) qualified nonprofit organization, it is a “non-taxable event for givers and receivers.” This means the donation will not be recognized as income or as a gain or loss. Donors do not have to pay capital gains tax on appreciated cryptocurrency, and will qualify for itemized charitable deductions depending on how long they held the crypto asset before the donation was made.
“If you held the cryptocurrency for more than a year (‘long-term’) prior to the donation then you will be eligible for the itemized charitable deduction for the fair market value (FMV) of the cryptocurrency at the time of contribution, in addition to not incurring a taxable gain on an appreciated asset,” said the guide.
This claim is backed up by the IRS’s non-binding Frequently Asked Questions.
Wilson said that 29 nonprofit organizations signed up to receive funds through the COVID-19 campaign, while 50 different corporate partners came together to help raise funds and awareness. Bitcoin (BTC) was the most donated cryptocurrency followed by ether (ETH).
“Now we are looking to replicate that success with the #CryptoForBlackLives campaign,” Wilson said.
Launched last month, the initiative hopes to raise $1 million for the civil rights campaign, with about $50,000 raised so far.
The Giving Block was founded two years ago by Wilson and Pat Duffy, when they realized crypto users had a tax incentive to donate their virtual currency directly to nonprofits. Wilson said the platform currently supports over 50 nonprofit organizations.
Crypto tax attorney Justin Woodward, the guide’s author, said in a statement to the press that it was “far more tax advantageous to donate capital assets rather than traditional fiat.”
“We believe it to be the future of charitable giving,” Woodward said.