Despite a bumpy ride, many bitcoin investors are sitting on big gains, with the cryptocurrency reaching new highs in 2021. One way to avoid the tax bite that comes with selling appreciated crypto is to direct it to charity instead, and investors are taking notice. In 2021 through September, donors contributed $158 million in crypto to Fidelity Charitable donor-advised funds, a 464% increase from the same period in 2020.
With a donor-advised fund, you can contribute assets at any time and decide later what charities to support with grants from the fund. Contributions are eligible for an immediate charitable tax deduction for those who itemize and grow tax-free in an investment account. And when you donate appreciated assets (such as stocks or crypto) that you’ve held for more than a year, you avoid long-term capital gains tax of up to 20% (see Your Guide to Giving). If you want to contribute to a charity that doesn’t accept crypto, funneling your donation through a donor-advised fund that takes crypto can bypass that obstacle.
The largest donor-advised funds accept donations of cryptocurrency, and others are expected to follow suit as the investment’s popularity grows. Fidelity Charitable has no minimum asset contribution for its donor-advised funds, to which donors can add crypto at any time. Schwab Charitable (no minimum for a self-managed account; $250,000 minimum for an account managed by an investment adviser) takes crypto contributions on a case-by-case basis. Vanguard Charitable ($25,000 minimum to open an account) accepts bitcoin from existing donors on a case-by-case basis.
Donations of appreciated crypto investments that you’ve held for more than a year, which qualify for a tax deduction of their fair market value, make the most financial sense. If you’ve held an appreciated cryptocurrency as an investment for a year or less, your tax deduction is limited to the cost basis—essentially, the original amount you paid. “It would be the same net effect, tax-wise, as selling it yourself and donating the proceeds,” says Tony Oommen, of Fidelity Charitable. And because cryptocurrency is considered property, donations of more than $5,000 in value require a qualified appraisal—which may run a few hundred dollars—to claim the tax deduction, says Oommen. Ask your tax adviser to recommend an appraiser, or use a service such as Charitable Solutions.
Lisa has been the editor of Kiplinger Personal Finance since June 2023. Previously, she spent more than a decade reporting and writing for the magazine on a variety of topics, including credit, banking and retirement. She has shared her expertise as a guest on the Today Show, CNN, Fox, NPR, Cheddar and many other media outlets around the nation. Lisa graduated from Ball State University and received the school’s “Graduate of the Last Decade” award in 2014. A military spouse, she has moved around the U.S. and currently lives in the Philadelphia area with her husband and two sons.
Mortgage Demand Rises Slightly As Rates Dip to 7.37%
Mortgage demand inched up last week as the 30-year fixed rate reached its lowest level in 10 weeks, economist says.
By Joey Solitro Published
Walmart Launches Parcel Stations To Speed Up Deliveries
Walmart says its parcel stations act like 'mini post offices' to quickly transport more online orders to customers.
By Joey Solitro Published
Best Books on Investing
investing Those looking to build their wealth should consider these best books on investing.
By Coryanne Hicks Published
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
What Is Margin Trading?
Margin trading involves investing with borrowed money. The practice is high risk, but it can also have big rewards.
By Jeff Reeves Published
Five Ways to a Cheap Last-Minute Vacation
Travel Procrastinator? No matter. You can pull off a fun and memorable getaway on a moment's notice — without breaking the bank.
By Vaishali Varu Published
How Much Life Insurance Do You Need?
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life-insurance needs.
By Kimberly Lankford Published
7 Stocks to Give Your Grandchildren
A pick of stocks to give your grandchildren as long-term gifts.
By Dan Burrows Published
How to Find the Best 401(k) Investments
Many folks are likely wondering how to find the best 401(k) investments after signing up for their company's retirement plan. Here's where to get started.
By Deborah Yao Published
How to Master Index Investing
Index investing allows market participants to use baskets of stocks and bonds to build the best portfolio to meet their goals. Here's how it works.
By Nellie S. Huang Published