Brink recently received 501(c)(3) public charity status, allowing US taxpayers to make tax-deductible donations to our organization. One of the questions we often get asked is whether it’s possible to donate Bitcoin to Brink, and how to do so in a tax efficient way.
There are two significant advantages to donating Bitcoin directly rather than selling and donating the proceeds:
Selling Bitcoin that you’ve held results in capital gains tax on the increased value of those Bitcoin. That reduces the amount you can effectively donate to the charity. Gifting the Bitcoin directly means that the charity benefits from the full value of the Bitcoin.
Your tax deduction will be for the full market value of the Bitcoin, rather than the amount after paying capital gains tax.
The two common ways to donate Bitcoin to nonprofits are directly (which may require a value appraisal), or through a donor-advised fund. This post describes both methods.
Donate Bitcoin Directly to Brink
If you’d like to donate Bitcoin directly to Brink, while receiving the tax benefit, then here are some general steps needed to complete the process. Please note that is for information purposes only and is not tax advice!
Consult with a tax professional who is familiar with your individual tax situation. They can guide you through this process such as completing the required IRS Form 8283.
Email email@example.com to let us know the amount you’d like to donate and your contact information (necessary for our bookkeeping and compliance requirements).
We will email you an invoice with payment options.
If the donation amount exceeds $5,000, contact a qualified appraiser before the completion of Part 1 of Form 8283. Two firms that offer appraisal of cryptocurrency assets are Charitable Solutions LLC and Crypto Appraisers. This is not an endorsement of these firms! As with any financial transaction, you should consult a professional to guide you.
Once the form has been completed by the appraiser, send it to firstname.lastname@example.org. We’ll fill out part V of the form and return to you. Your tax professional can guide you on next steps.
A donor-advised fund (DAF) is a private fund administered by a third party and created for the purpose of managing charitable donations on behalf of an organization, family, or individual.
DAFs have become increasingly popular, primarily because they offer the donor greater ease of administration, while still allowing the donor to maintain significant control over the placement and distribution of charitable gifts. In addition, companies are able to offer this service to clients at a lower cost than if the funds were handled privately.
There are several benefits to donating through a DAF:
It allows the donor to better manage their tax burden. For example, the donor may choose to donate a large sum to maximize deductions in one tax year, and then spread out their charitable giving from the fund over multiple years.
Any growth in the value of the fund is tax exempt.
It’s easy to donate Bitcoin (or other appreciated assets) to the fund while not incurring capital gains tax.
By donating Bitcoin through your DAF, you will receive the tax-deductible benefit for the value of the Bitcoin, but Brink will receive USD, not Bitcoin. For more details, please contact your DAF portfolio manager.
If you have an established account with one of the above-mentioned funds, then you can donate directly to Brink through your DAF.
If you’d like to learn more about the ways a DAF fund might be useful in your giving portfolio, contact email@example.com or the investment manager of your DAF.
Small donations of Bitcoin can be made through the donation page on our website, both through an onchain and Lightning payments. When donating anonymously, you will not be able to claim the donation as a tax deduction.
Our mission is to Strengthen Bitcoin by Supporting Bitcoin Developers. 100% of donations go towards our grant and fellowship programs to advance that mission. Thank you for your interest in supporting Brink!
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