As crypto investing grows, so does crypto donation.
Fidelity Charity Foundation customers donated $331 million in crypto in 2021, up from $28 million in 2020, according to the independent charity created by Fidelity Investments. The findings in a separate study conducted by Fidelity Charity also indicate that a third of crypto investors in general have donated digital currency to charities.
“Investors are more aware that this is an asset that can be donated,” said Tony Oommen, vice president of Fidelity Charity, which manages $50 billion in assets in donors-advised funds. as of June last year.
The sharp drop in the value of cryptocurrencies in recent weeks could certainly reduce such donations in the short term. But philanthropy experts believe that in the long run, more donors will use cryptocurrencies as part of their donations.
“Cryptocurrencies have the potential to expand the pool of donors,” said Una Osili, associate dean at Lilly Family School of Philanthropy at Indiana University-Purdue University Indianapolis. “In particular, younger donors – millennials and Gen Z – are more likely to own crypto than others, and more are starting to get involved in philanthropy.”
To be sure, many charities are not using digital currency yet. But ultimately, “charities that do not accept crypto will do so when they are in danger,” Mr. Oommen said.
Digital giving can lead to lower transaction costs than traditional giving — avoiding credit card fees, for example. Dr Osili said: “Cryptocurrency also makes it easier to donate abroad because there are no international exchange rates or financial regulations in place.
The ease of DAFs
One of the increasingly popular ways to donate crypto is through donor-advised funds, products managed by Fidelity Charity, Schwab Charity, and others. Investors in these funds can claim a tax deduction for the year in which the deposit to the fund was made. But the money could be dispersed over the coming years, at the investors’ direction, to charities of their choice.
When cryptocurrencies are placed in the DAF, they are usually instantly converted to dollars, to reduce the volatility of the cryptocurrency. There is no fee for sponsors.
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Meanwhile, whether giving cryptocurrency through the DAF or directly to charity, gifts to officially recognized charities are tax deductible to the IRS. You can deduct the full value of the contribution from your taxes if you held the cryptocurrency for more than a year and no longer owe capital gains tax.
If the deduction is greater than $5,000, the IRS requires you to make an independent assessment of the value of the cryptocurrency when you donate. “That will generally cost ‘a few hundred dollars’,” said Mr. Oommen.
Cryptocurrency sponsors can find such appraisers by consulting a tax accountant or attorney. Irene Sandler, vice president of marketing strategy for a global IT services company, says she paid under $200 to an appraiser when she gave away four ethereum coins — a total of $19,247 — for its donor-advised fund.
Ms. Sandler, who believes in tithing, or regularly donates a portion of her earnings to charity, said she donated the ethereum coins because she bought them on a nightingale and “didn’t do anything.” to deserve” with the profit. She said that the ethereum donation is part of a larger donation to charities, including the Union of Concerned Scientists.
Penelope Linge, an investor in Park City, Utah, said: “The tax benefits of donating with crypto are the main reason I do it. “Donating with bitcoin allows me to scale my giveaway.” Ms. Linge has put some of her bitcoins into a fund advised by donors specifically for Edesia, a group that seeks to prevent and treat malnutrition globally.
Both Ms. Sandler and Ms. Linge said that it is very simple to transfer crypto to funds advised by the donor. “I just filled out a few forms, transferred my keys from Coinbase,
and that’s it,” said Ms. Sandler. The key is the password for digital currencies and Coinbase is a cryptocurrency exchange.
While some nonprofits, including United Way and Unicef, accept cryptocurrencies directly, others get help from third-party services. One company that offers such services is Giving Block, which handles the logistics of transferring cryptocurrency. Usually, charities, not sponsors, pay service fees to such third parties.
Mr. Weil is a writer in West Palm Beach, Fla. You can contact him at Report@wsj.com.
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https://www.wsj.com/articles/how-to-donate-to-charity-with-crypto-11652975007?mod=rss_markets_main How to Donate Cryptocurrency to Charities