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How to Donate Cryptocurrencies


Today, not only do people worldwide put billions into cryptocurrencies, they can donate to charity using Bitcoin, Ethereum and more. Before doing the same it’s important to learn how crypto donations provide cash value to charities in need and allow donors to deduct cryptocurrency donations from their taxes. If you’re serious about donating crypto, you may want to work with a financial advisor who can help break down the impact on your individual finances.

How to Donate Crypto to Charity

As cryptocurrencies have become a widespread investment option, charities have created ways to accept many different types of crytpo as donations. With some preparation and understanding, your cryptocurrency donation could be an excellent way to champion a cause and you could benefit on your taxes. There may not be a single way to donate crypto that works for everyone, however, so it’s important to understand the potential impact before moving forward.

Sell Crypto and Donate Proceeds

One option is to sell the cryptocurrency and donate the cash you receive. An advantage to this method is that the charity can directly receive the donation without paying a third-party processor to convert the cryptocurrency into cash or require a donor-advised fund to hold the donation on their behalf.

However, donors must pay capital gains tax on the sale before donating the proceeds. Taxes could be as high as 37% if you have had the cryptocurrency for less than a year or 20% if you have held it for over a year. This option can negate some of the financial benefits of donating since you’ll have to take the money as a gain first.

Through a Third-Party Processor or Donor-Advised Fund

Although many nonprofits have started accepting cryptocurrency donations, few can directly handle cryptocurrency. The difficulties of creating a digital wallet continue to prevent most charities from having one. Luckily, third-party processors and donor-advised funds can process donations on a charity’s behalf.

Third-party processors charge a fee (usually 1%) to change the donated cryptocurrency into cash. This low fee can help you avoid capital gains tax and be a cost-saving alternative to selling the cryptocurrency first and donating the proceeds. Additionally, you can claim the value of the donation on your taxes if you itemize your deductions.

The other choice is a donor-advised fund, which receives cryptocurrency donations in the place of a charity. The donor-advised fund can exchange the cryptocurrency for money and invest the cash. You can deduct the value of your donation from your taxes and suggest how the fund directs the money.

It’s not recommended that donors give through a prearranged sale or a legal agreement requiring a fund or charity to cash in a cryptocurrency donation immediately. This agreement could diminish or nullify the tax advantage of the donation. Instead, make your donation without condition. Though a charity will typically sell donated cryptocurrency straight away, it may hang onto the cryptocurrency for a while instead. Either way, the charity owns the asset once it’s donated.

Reasons to Donate Crypto

crypto donation

Gone are the days when the world saw cryptocurrency as an experimental investment or pipe dream. The cryptocurrency market has amassed a value of more than $1 billion. Therefore, donating cryptocurrency is a significant option to consider and offers advantages for the charity and donor. Here are the three main reasons you may want to consider donating crypto.

1. To Protect Your Identity

The world of charitable giving is not immune to donors’ collective worries over digital security. conducted a recent study demonstrating that 68% of Americans considered the vulnerability of their personal data at least somewhat important. A cryptocurrency donation exposes your data less than a cash donation, protecting you from identity theft.

2. To Capitalize on Tax Advantages

A cash donation from selling cryptocurrencies could provide a tax benefit if you itemize your deductions. However, you can maximize this benefit by directly donating the cryptocurrency.

For example, suppose you bought $3,000 in Bitcoin. More than a year has passed since your purchase, and your Bitcoin’s value has risen to $7,000. You’re ready to donate the cryptocurrency and face two options:

  • Donate the cash from selling your investment: You will likely have to pay a long-term capital gains tax of 20%, not including other taxes, like state and Medicare. Therefore, you’ll pay about $1,400 in taxes and donate the remaining $5,600.
  • Donate the cryptocurrency through a third-party processor or donor-advised fund: You can still deduct the donation from your taxes, and the charity will receive nearly the full value of the cryptocurrency (a third-party processor would likely charge 1%, or $70, to process the donation).

3. To Incur Less Processing Fees

Credit card processing fees, comparatively, leave charities with less money. As noted, processing a cryptocurrency donation costs about 1% of the donated value. Contrastingly, Charity Navigator reports donation processors like PayPal and CrowdRise to charge up to 6.75% when handling transactions. In addition, if your favorite charity has its own online donation platform, that comes with extra costs.

Processing fees can significantly reduce your donation. For example, a cryptocurrency donation of $5,000 will likely translate to $4,950 for a charity after processing. On the other hand, a processing fee of over 6% would mean the charity receives about $4,660.

Examples of Nonprofits that Accept Crypto

As cryptocurrencies become more commonplace around the world, donating them to your favorite charity is possible in a way it was not just a few years ago. No matter what cause you support, they likely accept cryptocurrency donations.

  • Red Cross: The Red Cross “alleviates human suffering in the face of emergencies” through disaster relief and donated blood. The American Red Cross uses BitPay to accept donations of Bitcoin, Ethereum, Dogecoin and certain stable coins.
  • Human Rights Foundation: The Human Rights Foundation partners with activists to “unite the world to stand against tyranny” and accepts Bitcoin.
  • The Rainforest Foundation: The Rainforest Foundation seeks to “support indigenous and traditional peoples of the world’s rainforests in their efforts to protect their environment and fulfill their rights” and accepts Bitcoin, Cardano, Ethereum, USD Coin, Solana, Ripple and Celo Gold.
  • United Way: United Way focuses on “education, income and health – the building blocks for a good quality of life and a strong community” and accepts nearly every kind of cryptocurrency.
  • Khan Academy: Khan Academy’s goal is “to provide a free, world-class education for anyone, anywhere” and accepts Bitcoin, Bitcoin Cash, Litecoin and Ethereum.
  • The Water Project: The Water Project focuses on “providing reliable water projects to communities in sub-Saharan Africa” and accepts virtually every kind of cryptocurrency.

The Takeaway

crypto donation

If you’re flush with cryptocurrency you’ve held for over a year, you have a powerful philanthropic tool at your disposal. With the ability to sell cryptocurrencies and make a cash donation or transfer the cryptocurrencies themselves, there are multiple ways for you to make a tax-deductible cryptocurrency gift and fund charities that you believe in. And, if you have questions about donating crypto, a financial advisor can help.

Tips for Investing Responsibly

  • If you’re a philanthropic investor, diversifying is key to creating a portfolio that allows you to support causes you believe in. A financial advisor could advise you on asset allocation and help you create an investment plan. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you’re interested in balancing cryptocurrencies with other assets to generate a rate of return that suits your risk tolerance and time horizon, our asset allocation calculator will help you align your investment strategy with your risk tolerance.

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