Best Ways to Donate Cryptocurrency

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Best Ways to Donate Cryptocurrency

Donating cryptocurrencies has recently been a thing of keen interest as, for some time now, investors have been curious to know if it were even possible to donate cryptocurrencies.

This was proven by the Pineapple Fund which created a foundation for cryptocurrencies and has given out $55 million worth of bitcoin to 60 different charitable organizations for issues bordering on all aspects of life.

Since then, donating crypto to non-profit organizations has been a thing of attraction to investors, with quite a good number of crypto-supported non-profit organizations such as United Way sprouting up.

Best Ways to Donate Cryptocurrency
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Key Takeaways

 📌 Donating cryptocurrencies to non-profit organizations should be done using a third-party processor or a donor-advised fund to eliminate the cost of taxes.

 📌 Not all non-profit organizations accept cryptocurrencies as donations and even those that do accept only a limited number of cryptocurrencies.

 📌 Capital Gains Tax is a tax levied on your cash when you do not make a direct donation to a non-profit organization.

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 📌 Bitcoin is the most donated and most accepted cryptocurrency by many donors and non-profit organizations.

SEE ALSO: How To Avoid Crypto Taxes (4 Legal Ways)

SEE ALSO: How Does Crypto Taxes Work (All You Need to Know)

SEE ALSO: 5 Tax Advantages of Holding Crypto

One of the things that encourage crypto donations from any part of the world is the ability for the sender to do so in minutes and anonymously, with the guarantee that they will not incur high fees in the process as well.

Thankfully, this is a technological innovation that has been made possible, which in turn has made crypto special and donations a lot easier.

Avoiding Tax Charges on Crypto

Best Ways to Donate Cryptocurrency

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Donating cryptocurrencies might be a noble effort, but that does not take away the fact that there are circumstances where you might be charged tax fees for carrying out this activity.

In some countries, there is a form of tax popularly referred to as the capital gains tax. If you happen to be residing in a country that charges this type of levy, you might want to pay close attention to what I have to say next.

You see, a capital gains tax is a fee gotten from the difference between a crypto’s selling price and its purchase price.

Now, what do I mean by this? It simply means that when you sell Ethereum, for instance, the money derived from that sale, after the usual tax cut has been deducted, will be charged a capital gains tax depending on how long you held it before giving it out as a donation.

This means if you held that cash for a long time, you will be taxed on a long-term capital gains tax. If the holding period was short, you will be taxed on a short-term capital gains tax.

In essence, the longer you hold the money, the higher the percentage that will be collected as a capital gains tax.

The only way to avoid this tax is to donate the cryptocurrency directly to the non-profit organization without first converting it to cash.

This technique, however, is not a simple one as most non-profit organizations do not accept cryptocurrencies as a means of donation, so you might want to do some research to find out the few that do before proceeding to take the next course of action.

Why most non-profit organizations do not accept crypto donations

Best Ways to Donate Cryptocurrency

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The reason most non-profit organizations do not accept crypto donations isn’t that they are crypto averse or because they are not aware that it is a form of money. Rather, it is simply because of the complexities that are involved in setting up a digital wallet.

Even if these non-profit organizations decide to create a wallet and own the keys to that wallet, they still may not be eligible for crypto donations.

In the interest of these non-profit organizations, the only option left for you if you want to donate crypto is to do so using a third-party processor or through a donor-advised fund.

An example of a third-party processor is Crypto for Charity, which converts these crypto donations to cash on behalf of these non-profit organizations and then sends the donations to them in the form of cash in return for a small transaction fee of just 1%.

A donor-advised fund, on the other hand, will receive the crypto donation and invest it, becoming eligible for a tax reduction in the process, and then inform the charity foundation of the investment and how it can benefit from it.

A typical example of a donor-advised fund is the Fidelity Charitable.

List of non-profit organizations and the cryptocurrencies they accept

Below is a list of some of the non-profit organizations I could find with the number of cryptocurrencies they support:

  • Electronic Frontier Foundation

This foundation accepts Bitcoin, Bitcoin Cash, and Ethereum.

  • Freedom of the Press Foundation

This foundation accepts Bitcoin, Bitcoin Cash, Ethereum, ZCash, and Litecoin.

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  • GiveCrypto

This non-profit organization accepts Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and USDC via Coinbase Commerce.

  • Greenpeace

This is a non-profit organization that accepts only Bitcoin.

  • United Way

This non-profit organization accepts only Bitcoin via Bitpay.

  • The Water Project

This non-profit organization accepts Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and USDC via Coinbase Commerce.

  • RainForest Foundation

This non-profit organization accepts Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.

  • Khan Academy

This non-profit organization accepts Bitcoin, Bitcoin Cash, Litecoin, and Ethereum.

  • Internet Archive

This organization supports Bitcoin, Bitcoin Cash, Ethereum, XRP, and ZCash.

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Frequently Asked Questions (FAQs)

Does Electronic Freedom Foundation accept crypto?

Yes, it does, as it currently supports Bitcoin (BTC), Bitcoin Cash (BCH), and Ethereum (ETH). 

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Does any non-profit organization accept Bitcoin?

Yes, well-known non-profit organizations such as United Way and Rainforest Foundation accept bitcoin and other cryptocurrencies.

Final Thoughts

Donating cryptocurrency is a noble act, but before you do so, learn about the organizations to which you are donating and whether they accept cryptocurrencies.

For starters, you can always donate to one of the non-profit organizations listed in this article.

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