Why and how to donate Bitcoin (or any crypto) to charity

As cryptocurrency becomes more mainstream, it’s transforming the landscape of much of the financial world. Nonprofit organizations that rely on donations to do good work in their communities have taken note, too.

More and more charities today accept crypto donations, and it’s a growing trend.

Just like other appreciated assets, such as stocks, you can donate crypto directly to charity. These charitable donations are a great way to support the causes you care about while accruing some tax benefits for yourself.

In fact, the savviest crypto owners know that these donations bring especially unique benefits for themselves and for their favorite charities—more on these below.

So how does it work? This quick guide will break down everything you need to know to start supporting nonprofits and receiving valuable tax benefits.

Can you donate crypto to charity?

Yes, and a lot of crypto owners do!

Since 2018, an estimated $2 billion has been donated to nonprofits in the form of cryptocurrency.

And with ways to donate crypto to charity multiplying, it’s easier than ever for donors to take action. Just as Bitcoin ETFs are newly mainstream investment choices, donor-advised funds (philanthropic investment accounts) now widely accept deposits of crypto, as well. In 2022, Fidelity Charitable found that $38 million was deposited to donor-advised funds in the form of crypto.

Big crypto gifts have been especially popular among savvy investors. Plus, data shows that crypto investors tend to be more charitable than the average investor. A 2020 study found that 45% of crypto investors donated at least $1,000 to charity that year (compared to 33% of the overall investor population).

Why should you donate crypto to charity?

So why should you consider donating crypto to charity? What are the benefits of giving this way? Let’s look at a few key reasons:

1. You’ll reduce your capital gains taxes.

Crypto donations are a tax-smart capital gains strategy.

Since the IRS categorizes crypto as property, you typically have to pay a tax on any realized gains when you sell your crypto to convert it back to cash or another digital currency. These are called capital gains taxes and can be substantial—hundreds or thousands of dollars, depending on your portfolio.

However, you can avoid paying these taxes if you donate that crypto instead. Additionally, since charities are exempt from paying capital gains when they accept crypto, they can keep the full value of your gift, so your dollar stretches even further to drive impact for a good cause.

2. You can get a federal tax deduction on your crypto gift.

That’s right—a charitable crypto donation can sometimes count for two kinds of tax liability reductions: eliminated capital gains taxes and a federal tax deduction.

When you donate to a nonprofit, you may be able to get a federal income tax deduction up to the total value of your gift if you’ve held the crypto for over a year. This can hinge on a number of factors, particularly the IRS classification of the organization you donate to. The organization should let you know if the gift is tax deductible, but always consult with a tax professional if you’re unsure once it’s time to file.

3. You maximize your impact on the charity (and skip unnecessary fees).

When you donate to any nonprofit through Crypto for Charity, FreeWill’s zero-fee crypto donation platform, the full amount of your gift goes straight to the charity—without the 2-5% processing fees that would ordinarily come out of the gift when using other crypto donation platforms or credit card processors.

Those savings mean that the nonprofit receives the full amount as you intended—no unnecessary fees, and maximum impact for the cause you care about.

Understanding the tax savings of donating crypto

Here’s a quick example to summarize the benefits of donating cryptocurrency to nonprofits:

Let’s say you bought Bitcoin years ago for $5,000 and are now ready to part with it (and snag a tax deduction). Today, the Bitcoin holding is worth $33,000. Estimated capital gains taxes on this appreciation would come in somewhere around 20%.

You have two options for donating this crypto to charity. You can either sell the crypto yourself and donate the cash, or give the crypto directly to your favorite nonprofit.

1. In the first case, roughly $5,600 in capital gains taxes would come out of the total proceeds from the liquidation. You’d donate the remaining amount of $27,400 and then claim that deduction on your federal taxes.
2. In the second case, you give the Bitcoin directly to the nonprofit, which then liquidates it (and pays no capital gains taxes as a charity). The nonprofit gets the full $33,000, and you enjoy a much higher tax deduction.

Today’s crypto giving technology maximizes the benefits for both parties. What’s not to love?

If you want to donate crypto to a nonprofit, contact them first to ask if and how they accept and process these gifts. If they typically ask donors to liquidate crypto before donating the proceeds, send them this article on how to accept crypto gifts!

How to donate Bitcoin and other crypto to nonprofits

Because crypto is still a relatively new market, especially in the nonprofit space, crypto donations are not yet as straightforward as donations in cash.

Many organizations haven’t yet moved into crypto because it requires more logistics, technical expertise, and resources on the charity’s part. Considerations like which crypto to accept, how and when to cash out, and how to handle market volatility all make things more complicated than simple cash donations, too.

So if you’re wondering exactly how to donate cryptocurrency, you’re not alone. But thankfully, modern solutions make it easy, and more and more nonprofits are catching on.

These are the two easiest ways to donate crypto to charity:

• Give to a nonprofit that uses FreeWill’s Crypto Giving tool. The process will be like any other transfer of crypto assets, requiring some transaction details about your contact information, donation amount, and your crypto wallet. The giving tool will then liquidate and disburse the full funds straight to the charity.

• Contribute crypto to a donor-advised fund (DAF). DAFs are an extremely popular new way to give to charity. These philanthropic investment accounts give you immediate tax benefits and grow over time while you disburse amounts to nonprofits. Fidelity Charitable is a leading provider of DAFs that can accept deposits of crypto (plus other appreciated assets like stock). DAF giving brings you the same tax benefits—eliminated capital gains taxes, potential federal tax deductions, and maximum impact for nonprofits.

With these modern (and tax-savvy) donation methods, you drive the most impact possible for charity. Reach out to your favorite nonprofits to see what giving options they offer and let them know there are easy ways to modernize their giving programs!

Ready to donate crypto today?

We’re on a mission to make crypto philanthropy accessible for nonprofits and donors alike. That’s why we’ve created a no-catch, zero-fee donation tool—crypto philanthropy should be possible for everyone!

Here’s how you can make a crypto donation today:

1. To use the tool, visit www.cryptoforcharity.io, then select your crypto and the nonprofit you’d like to support from the over 55,000 nonprofits and cause funds that use our tool.
2. Your donation will be securely sent to our affiliated 501(c)(3) tax-exempt charity, FreeWill Impact Fund (EIN: 86-1218871). Our Impact Fund then converts your gift to USD, and 100% of the net proceeds of your donation are distributed to the nonprofit or cause you chose (subject to applicable grantmaking policies).
3. The value of your donation will correspond to the exchange rate at the moment your gift is converted to USD, usually within 10 minutes of gift receipt.
4. You’ll receive a comprehensive gift receipt that you can use for tax filings as needed.
5. Your funds will be on their way to supporting important nonprofits’ work!

For a closer look at the process, check out the Crypto for Charity FAQ page.

Crypto donations are an exciting new frontier for nonprofits, and you’re helping to lead the charge. By giving crypto to charity, you’ll create maximum positive impact for your favorite causes and tap into unique (and quite valuable) tax benefits—a true 21st-century win-win.

Want to learn more about modern giving options and how they help nonprofits? Check out these additional resources:

• 9 smart ways to donate to charity (and how they can benefit you, too)
• Donating stock to charity: A step-by-step guide for donors
• Estate planning for cryptocurrency: How to include crypto assets in your estate plan
• What is a bequest?