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Tax-Exempt Charitable Donations: A Lucrative Opportunity
When it comes to tax deductions, charitable donations are among the most generous. Adam Nash, CEO and co-founder of Daffy, a platform that helps manage donor-advised funds, points out that charitable deductions offer the taxpayer the ability to deduct contributions of assets—up to 30% of their adjusted gross income for the year. This makes it an enticing strategy for anyone looking to minimize their tax liabilities.
Fidelity, a trusted source in investment advice, also highlights that a range of assets can be donated to charities, including stocks, bonds, mutual fund shares, and yes, cryptocurrencies. If you’ve held cryptos for more than a year, donating them could provide a major tax advantage, all while supporting causes that matter to you.
The Benefits of Donating Cryptocurrencies
If you happen to own cryptocurrencies that have appreciated in value over time, donating them can be a win-win situation. According to Nash, donating cryptocurrencies held for over a year means you won’t have to pay taxes on any capital gains. “You’ll benefit from one of the most generous tax deductions,” Nash explains. “When you donate appreciated crypto to a qualified public charity, the IRS allows you to deduct the fair market value of the asset at the time of donation, rather than the price you paid for it.”
This is a significant advantage for anyone whose crypto investments have substantially grown in value. The capital gains tax—typically owed when you sell an asset—can be avoided entirely, making a charitable donation an attractive option for tax-conscious investors.
Maximizing Savings Through Crypto Donations
The strategy of donating appreciated assets, particularly in the form of cryptocurrencies, can be an excellent way to maximize your tax savings. Ephraim Olson, co-founder of CPAI, a platform that uses AI to handle crypto tax filing, emphasizes that donations made to charities can provide significant savings when done correctly.
“If the donation complies with the IRS rules,” Olson explains, “the taxpayer can deduct the fair market value of the cryptocurrency, even though the original purchase price is much lower. This means you get to keep the gains without having to pay tax on them.” This creates an opportunity for crypto investors to enjoy the full value of their investments, while also contributing to a good cause.
For taxpayers who itemize their deductions, the impact of donating crypto assets can be even greater. As Nash points out, donating appreciated cryptocurrencies not only allows for potential tax savings but also generates more income for the charity itself. By donating instead of selling, investors avoid triggering a taxable event and maximize the financial benefit of the donation.
Know the Rules and Consult Professionals
It’s crucial to note that donating cryptocurrencies comes with specific rules and requirements that must be met to ensure you receive the intended tax benefits. Olson advises that crypto donations require proper valuation and adherence to IRS guidelines, and failing to meet these criteria could result in the donation being non-deductible.
“Some of these requirements can’t be corrected afterward,” Olson warns. “If the rules are not followed, the donation won’t be tax-deductible.” Given the complexities involved, it’s always a good idea to consult with a tax professional or crypto advisor before proceeding with a donation. Ensuring compliance with IRS regulations will help avoid any potential complications when it comes to claiming your tax deductions.
An Opportunity in 2025’s Market Climate
The current market cycle may not see the explosive growth that some experienced in previous years, but that doesn’t mean there isn’t potential for crypto donations to still provide excellent savings. As Olson suggests, the possibility of crypto assets appreciating in the latter half of 2025 could present an opportunity for savvy investors to make charitable donations and reap the tax benefits.
While there are limits on how much income can be offset by donations of appreciated assets, the rules surrounding these donations remain a useful tool for tax efficiency. If market conditions change and crypto prices start climbing again, making crypto donations could be an incredibly smart financial strategy.
In Conclusion: Donating Crypto to Save Taxes
When done correctly, donating cryptocurrencies offers a unique opportunity to reduce your tax burden while supporting the causes that matter to you. As we move through 2025, crypto donations are likely to become an increasingly attractive option for investors looking to maximize their tax savings. However, it’s important to stay informed about the rules, ensure compliance with IRS guidelines, and consult with professionals to make sure you’re getting the most out of your donations.
By making a crypto donation, you not only help a charitable organization but also keep more of your gains for yourself. It’s one of the smartest financial moves you can make this year.
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