Crypto Donations – What you need to know

Crypto Donations

Cryptocurrencies have gained significant momentum in the last few years, with Bitcoin leading the charge. 

Cryptocurrencies can take many forms, such as tokens on the Ethereum blockchain or colored coins on the Bitcoin blockchain. 

Still, they all have one thing in common-any central authority does not control them. This has led to a rise in cryptocurrency donations to registered nonprofit organizations (NPOs). 

We’ve put together this quick guide on crypto donations, so you know what you need to know about them. 

Is it legal?

It is indeed legal. The IRS has a special section on its website that addresses crypto donations

They’ve also published a document stating that virtual currency is treated as property in most cases. 

For example, if you receive bitcoin for your organization, it’s considered income and therefore taxable. 

That said, Section 501(c)(3) does exempt organizations from tax if their earnings are conclusively determined by their donors or sponsors to be used for charitable purposes. 

This makes it fairly easy for charities to accept crypto without incurring taxes on every transaction (but it doesn’t mean everything goes). 

If you want to know more about how cryptocurrencies are taxed, check out our full guide here.

How do I donate?

Crypto is a completely digital currency. Unlike fiat currency, it is not printed or minted. It exists only in digital form. 

One of its best features is that it is relatively simple to get involved with: 

There are a number of exchanges where you can buy crypto with traditional currencies like dollars and euros, and there are also apps on your phone that allow for easy transfer of money between exchanges and wallets. 

If you have already bought some crypto, donating to causes is as easy as sending emails or text messages. 

You just enter in how much you want to donate and then send it off. The recipient will receive their donation via whatever method they have selected. 

Suppose you haven’t yet bought any cryptocurrency but still want to donate. 

In that case, we recommend Coinbase – one of the largest exchanges out there – which allows for a very quick purchase of Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).

Why does charity accept donations in crypto?

If a charity accepts crypto, it’s for a reason. They understand that cryptocurrencies are here to stay and want to help develop their business by expanding their audience base. 

By accepting crypto donations, your charity will be able to reach people in your community that may not have been able to donate otherwise. 

By accepting crypto, you’re allowing donors worldwide – with no geographical limitations – that can support causes they care about.

Are there tax benefits for donating in crypto?

One of the main reasons people consider crypto donations is their lack of transaction fees and transfer costs. 

Many charities feel that accepting donations in cryptocurrency can bring in a new demographic of donors, leading them to accept donations in Bitcoin and other coins without much thought. 

However, any time you receive money for your business or nonprofit, there may be tax consequences, even if it’s not from fiat currency.

How to find information about which charities accepts crypto donation?

There are a few websites that can help with cryptocurrency donations. For example, coinbase has created a useful link showing all their charity partners. 

In addition, CharityNavigator offers crypto donation information on each organization they rate. 

Although Charity Navigator is designed for nonprofits, some organizations have their information included even though they are not officially registered as charities. 

If your favorite charity doesn’t have either of these setups available, contact them directly and see if they will tell you what type of payment methods they accept (if any).