The tax deductibility of cryptocurrency donations can depend on several factors, including the tax laws of the country in which the donation is made, the organization or charity that is receiving the donation, and the specific rules and regulations surrounding cryptocurrency donations.
In the United States, for example, the Internal Revenue Service (IRS) treats cryptocurrency as property rather than currency for tax purposes. Therefore, donations of cryptocurrency to qualified charitable organizations in the United States are generally tax-deductible, subject to certain limitations and reporting requirements. However, it is important to note that not all charities may be able to accept cryptocurrency donations, and some may have specific guidelines or restrictions.
It is always advisable to consult with a qualified tax professional or financial advisor regarding the specific tax implications of any cryptocurrency donations you may wish to make. They can help you understand the relevant tax laws in your jurisdiction and provide guidance on the proper reporting and documentation requirements for your donations.
How to deduct crypto donations from tax
Depending on the size of the donation, the methods and documentation requirements for reporting long-term crypto charity donations differ. Regardless of the size of the contribution, you will only be eligible to deduct it if you opt to itemize your deductions rather than accept the standard deduction.
Donations under $250
If the value of your crypto donation is less than $250, report it on Form 1040 Schedule A, under Itemized Deductions. You must obtain a receipt from the receiving organization that includes the organization’s name and address, the date and amount of the donation, and the amount of the donation.
Donations up to $500
If the value of your cryptocurrency donation is between $250 and $500, you must still declare it on Form 1040 Schedule A, under Itemized Deductions. Yet, you will need additional evidence to support your claim. You will need to obtain what is called a “contemporaneous written acknowledgement” of the donation from the recipient organization.
This record must:
- Be in writing
- Provide a description of the donated cryptocurrency and an estimate of its fair market value
- Indicate whether the donor received goods or services in exchange for the contribution.
- Before the donor files their tax return or before the tax deadline
Donations over $500
For contributions over $500, you must complete Form 8283 Section A, Noncash Charitable Donations. The same standards for substantiation apply to all donations exceeding $250.
Donations exceeding $5,000
Donations in excess of $5,000 must be reported on Form 8283, Sections A and B, Noncash Charitable Contributions. In addition to meeting the standards for donations above $250, you must additionally submit a qualified appraisal of the donation’s value.