With the market capitalization of digital currencies surpassing $2 trillion, there is now record interest in crypto philanthropy. From helping to b
With the market capitalization of digital currencies surpassing $2 trillion, there is now record interest in crypto philanthropy. From helping to build a school in Uganda to fundraising for frontline healthcare workers and raising awareness for artists with intellectual disabilities, many nonprofit projects are gaining traction with generous assistance from crypto enthusiasts.
But the rewards of giving crypto to charities aren’t limited to the feeling of having accomplished an altruistic task. The Internal Revenue Service currently classifies crypto as capital assets, like stocks. That means an investor can deduct the full market value of the cryptocurrency at the time of donation against their ordinary income (i.e., salary) over the period of a few years, while avoiding the capital gains tax altogether.
For example, suppose a crypto investor, Elsa, makes $85,000 per year on employment income (single tax filing) and bought $10,000 worth of Bitcoin (BTC) four years ago. In December, she donates the full value of her investment, now worth $29,650, to the American Cancer Society.
Not only does the ACS get a lump sum of cash to fund its operations, but Elsa can deduct 30% of the value of her donation per year, with the remaining amount carried forth for a maximum of five years. So her income for tax purposes for year one would only be $76,105, with Elsa saving $7,116 in federal taxes in total due to her donation.
The generous tax treatment of crypto donations may be precisely why the practice is becoming so popular. In an exclusive interview with Cointelegraph, Alex Wilson, CEO of nonprofit fundraising platform The Giving Block, discussed how the setup results in a win-win situation for investors and charities alike. During Crypto Giving Tuesday, the organization raised over $2.4 million in a single day for charities.
Cointelegraph: How are you making the donations secure to reach their intended charitable organizations?
Alex Wilson: We were intentional in the way we set this up so that all the donations from a donor always go directly to a charity’s wallet. Now, we aren’t a pastor or anything like that, so it’s always going directly to the charity’s wallet. And on the back end, they have institutional accounts with Gemini. That way, they don’t have to worry about, you know, managing their private keys and things like that. They use a custody solution of Gemini through us.
CT: Was there a major theme this year regarding donations?
AW: I mean, it’s normalized to be a little bit of everything in terms of the theme. We see all sorts of different types of charities, also different sizes. We work with a lot of local charities, but also national, international brands. So, a little bit of everything really. I wouldn’t say there’s one group or one type of nonprofit that’s getting more donations than others. But I would say some of the larger charities tend to do pretty well, like some of the name brands that you might recognize, like Save the Children or American Cancer Society — you know, names like that. They tend to do a really good job fundraising. Or groups like St. Jude. They’re good at fundraising donations in general, so they tend to be better at fundraising crypto as well.
CT: What is the volume of donations you saw this year, and how does it compare with previous years?
AW: We’ll do over $100 million in donation volume just this year. And usually, it’s more than people expect. So, it’s significantly more than last year. Last year, we did $4 million for the entire last year. We’re doing more than that every month now. Also, in terms of the number of nonprofits, we’re working with huge growth. We had about 100 nonprofits on the platform last year, and now we just passed 1,000. So, basically 10x growth in terms of the number of nonprofits accepting crypto. It’s really hitting a tipping point now, and it’s becoming more mainstream. So, basically, nonprofits are getting more comfortable with the idea of raising crypto, especially now that they see these excellent outcomes. It’s no longer this like fringe thing. They’re seeing large companies getting into crypto, and they’re getting much more comfortable with this concept of fundraising crypto.
CT: Do you have any features where an NFT could be donated directly to a charity organization or something similar to physical artwork?
AW: Typically, what we recommend is just donating the proceeds of the NFT. The tricky thing about sending the NFT directly to the nonprofit is valuation and tax deductibility. So, it gets complicated with NFTs since there isn’t a lot of guidance from the IRS and other tax agencies on the tax treatment of NFTs. But it is evident when you’re just donating the proceeds because then it’s just like a regular crypto donation. So, in general, we’re saying, “Hey, if you’re an artist, a creator, please sell the NFT, then donate the proceeds…
cointelegraph.com