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In this article, we will explain some of the benefits for companies and individuals to do stock and crypto donations.
For those with a charitable heart, Bitcoin and Ethereum investments held for over a year provide a rare opportunity to utilize highly appreciated assets to maximize charitable giving.
Putting long-term investments in cryptocurrency to charitable use unlocks additional funds in two ways. The first benefit is the potential to avoid capital gains tax, increasing your ability to donate to charity by as much as 20% if the assets are sold yourself. As an alternative to taking the standard deduction, you may be able to claim a charitable deduction based on the fair market value of the item for the year you donate. If you do this, you may be able to pass on the savings to more charities.
This article is not intended to provide tax or legal advice, but to provide some general guidelines on how to make a donation. Tax consequences should be discussed with your tax consultant.
How to Donate Stock
It is simple to give appreciated stock to an organization you care about by donating it.
The value of your stocks may have increased since you bought them. Your portfolio might be out of balance because one of your investments has gone up in value. It might just be a case of refocusing on other investment opportunities. If you also donate to charitable organizations, you may want to consider your investment portfolio in light of your donation strategy.
The most tax-efficient way to give to charity is to donate your stock directly to them. Despite this, this isn’t a common practice. The charitable donation value of appreciated stock held more than a year can save you up to 37% in federal income taxes, depending on your tax bracket when itemizing deductions.
You should consult your tax professional about your tax implications if you give appreciated stock, including any potential state tax savings.
The idea of donating stock may not appeal to some people due to their belief that they will have to complete a lot of paperwork and telephone calls, or that the charity they choose won’t accept it. A company called Overflow offers a platform that allows you to donate stocks and cryptocurrency with ease, so that both the giver and the recipient benefit.
Overflow is a web-based solution for donating non-cash assets, allowing donors to give tax-efficiently. In less than five minutes, donors can use their mobile devices to give via crypto or stock. Givers also have access to a private Donor Portal, which provides them with complete visibility into their gift history, transaction status, and the ability to update their linked financial accounts.
How to Donate Cryptocurrency
Individuals and organizations are increasingly choosing to give to charities via crypto. The Red Cross and United Way are among the world’s biggest charitable organizations that accept cryptocurrency.
GiveCrypto.org is a nonprofit organization (Coinbase CEO Brian Armstrong is a founder) that works to reduce poverty through direct community donations of cryptocurrency. Through a cryptocurrency fund designated by UNICEF, UNICEF became the first UN Organization to hold and conduct transactions in cryptocurrencies. In total, UNICEF has received over $5 million in ETH and bitcoin as of April 6th, 2021. You can also try Daffy – a new giving platform that sends cash donations to charities and nonprofits, and which allows you to choose among over 1.5 million organizations the platform supports.
It is an innovation specific to crypto to allow donors to anonymously and quickly make donations from wherever they are, without incurring high fees. This innovation makes donations more efficient, equitable, and easy.
Other Advantages of Donating Crypto
Crypto is private
Donors are becoming increasingly concerned about privacy and data security, which can be addressed with crypto. A survey by Give.org in 2021 revealed that philanthropists of all ages are concerned about the privacy of their data.
If you donate cryptocurrency directly to an organization, your personal information would be better protected, and it could potentially allow for more funds to be donated to causes you care about.
Organizations may find it cheaper to process crypto donations
Approximately 63% of donors worldwide prefer to donate online via debit or credit card, according to the 2020 Global Trends in Giving Report. However, giving by credit card can reduce the amount that organizations receive – because processing fees are generally between 2.2 and 7.5%.
For example, if you donated $1000, the fees could be as much as $75, whereas a crypto donation would incur fees of less than $10
Can cryptocurrency be donated?
You can donate Bitcoins and other cryptocurrencies to charity just like you can donate stocks and other properties. Direct donations of Bitcoin can also reduce capital gains tax.
How do nonprofits accept cryptocurrency?
By going through a payment processor, your nonprofit can accept cryptocurrency donations, automate receipts, and convert cryptocurrency into cash. In this way, your nonprofit can keep cryptocurrency as an investment.
What is a crypto donation?
Cryptocurrency donations are considered property by the IRS, so they are not subject to capital gains tax and can be deducted from income. You can deduct as much of your donation as allowed by law. Bitcoin, for example, is treated as property by the IRS for tax purposes by donors in the United States.
How to accept cryptocurrency at your nonprofit
Join a cryptocurrency platform and open an account. If you want to accept crypto payments, you’ll need a crypto payment processor account or a crypto wallet.
You can accept cryptocurrency donations on your website.
To avoid anonymous donations, collect donor information.
Can a non-profit buy crypto?
Usually, nonprofits accept bitcoin or Ethereum as donations. Nonprofits that actively market cryptocurrencies may also receive lower-value coins and tokens, such as bitcoin cash, litecoin, and ripple, in greater volume.
Do I have to pay taxes on crypto?
Cryptocurrencies such as Bitcoin, Ethereum, and others are taxable. Cryptocurrency holdings are considered to be “property” by the IRS, so your virtual currency is taxed just like any other assets you own, like gold or stocks.
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