How gifting appreciated cryptocurrency works — overview
Donating appreciated cryptocurrency to a qualified charity is treated by the IRS as a gift of property, not a sale of an asset. Under current IRS guidance, virtual currency is property for federal tax purposes (IRS Notice 2014‑21 and the IRS virtual currency webpage). That classification creates two immediate tax advantages for many donors:
- You avoid recognizing capital gains on the appreciated amount because you didn’t sell the asset. The charity, not you, receives the property. (See IRS Notice 2014‑21 and the IRS virtual currency resources.)
- If you itemize deductions, you typically can deduct the fair market value (FMV) of the gift on the date of donation, subject to the limits that apply to gifts of appreciated property.
Below I outline the rules, common scenarios, reporting requirements, and practical steps I use in client work to help ensure donations are both effective and compliant.
Key tax rules and limits (what to expect)
- Classification: The IRS treats donated cryptocurrency as property (virtual currency guidance; IRS Notice 2014‑21, irs.gov/individuals/virtual-currencies).
- Fair market value: Use an exchange price or other reliable market rate at the exact date and time of transfer to determine FMV.
- Holding period: To claim a deduction for the full FMV, you generally must have held the asset more than one year (long‑term capital gain property). If held one year or less, the deduction is limited to your cost basis (effectively the amount you paid).
- Deduction limits: For donations of appreciated property to a qualified public charity, the usual limit is 30% of your adjusted gross income (AGI). Lower limits (often 20% of AGI) can apply for gifts to certain private foundations and other non‑public charities; donor‑advised funds, community foundations, and public charities typically fall under the public charity rules but verify the sponsoring organization’s status in each case.
- Carryover: If your deduction exceeds the AGI limits, the excess can usually be carried forward for up to five years (see IRS Publication 526).
- Reporting: Noncash gifts have special reporting rules. Generally, you must complete Form 8283 for noncash contributions over $500, and Section B (with additional appraisal requirements) for claimed values over $5,000. Treat cryptocurrency consistent with Form 8283 instructions and consult a tax advisor for high‑value gifts.
Authoritative references: IRS Notice 2014‑21; IRS virtual currency page (irs.gov/individuals/virtual-currencies); IRS Publication 526 (Charitable Contributions); Form 8283 instructions.
Practical examples
Example 1 — Long‑term holding and deduction of FMV
- Purchased 1 BTC for $5,000 several years ago. On the donation date the coin is worth $50,000. You transfer the coin directly to a qualified public charity that accepts crypto. Because you held the coin >1 year, you avoid capital gains tax on the $45,000 appreciation and may deduct the $50,000 FMV (subject to your AGI limits).
Example 2 — Short‑term holding (≤1 year)
- Purchased ETH three months ago for $2,000 and now worth $8,000. If donated within one year, the deduction is generally limited to your cost basis ($2,000), so the tax benefit is smaller than for long‑term holdings.
These examples are illustrative; actual tax results depend on your full income picture and whether the recipient is a qualified organization.
Common donation methods and implications
- Direct transfer to a charity wallet: If the charity accepts crypto directly, a wallet‑to‑wallet transfer is the cleanest approach. Get a written acknowledgment that includes the date, the cryptocurrency type, the number of coins/tokens, and a statement the charity received the asset.
- Using a brokerage or giving platform: Many custodians (Coinbase, Fidelity Charitable, The Giving Block, etc.) and some brokerages accept gifts of crypto and provide donor acknowledgments. Platforms often handle valuation and liquidation. If you give through a donor‑advised fund (DAF), you receive the charitable deduction when you contribute to the DAF; then you can recommend grants from the fund later. For more on DAFs and their treatment, see our guide to donor‑advised funds (Donor‑Advised Funds (DAFs)).
- Selling then donating cash: Selling crypto and donating cash eliminates the capital gains avoidance — you’d pay tax on the sale then receive a cash deduction. Direct giving of the asset is generally more tax efficient for appreciated property.
Documentation and reporting checklist (what I require from clients)
- Charity verification: Confirm the recipient is a qualified organization (use IRS Exempt Organizations Search or ask the charity for its EIN and letter of determination).
- Transfer proof: Save transaction records showing the blockchain transfer or brokerage transfer confirmation, date, and time.
- Valuation evidence: Record the exchange price(s) used to establish FMV on the donation date; download screenshots or exchange history showing the price and time stamp.
- Written acknowledgment: For any donation, obtain a contemporaneous written acknowledgment from the charity stating the date, asset description, and affirmation that no goods or services were received in return (required for itemized deduction).
- IRS forms: Prepare Form 8283 if the combined noncash gifts for the year exceed $500. For claimed values above $5,000, follow Section B requirements and consult guidance about whether a qualified appraisal is necessary for your situation (Form 8283 instructions and Publication 526).
Practical tips and pitfalls
- Hold at least one year when possible. The difference between short‑term and long‑term treatment can change the deductible amount dramatically.
- Confirm the charity’s policy on crypto gifts. Not all charities accept crypto directly; some accept through a third‑party processor or a DAF.
- Watch valuation timing. FMV is the market price at the time the charity takes control of the asset — this is often the timestamp of the blockchain transfer or the custodian’s receipt confirmation.
- Expect liquidation. Many charities and DAFs liquidate crypto immediately to cash for operational simplicity. That’s normal and does not affect your deduction.
- High‑value donations can attract extra scrutiny. For large gifts, expect to provide extra documentation and, in some cases, a qualified appraisal. If you claim a large deduction, work with a tax professional to avoid misreporting errors.
When gifting to donor‑advised funds (DAFs)
Gifts to DAFs are a popular option for crypto donors because DAFs accept a wide range of assets and allow you to recommend grants over time. You typically get an immediate deduction when you contribute to the DAF. Note that some DAFs will impose minimums or liquidate assets on receipt. See our donor‑advised fund article for setup and reporting guidance (Donor‑Advised Funds (DAFs)).
State tax and other considerations
State deduction rules vary. Some states conform to federal rules; others have different treatment for charitable deductions or limit itemized deductions. Evaluate state‑level effects with your tax advisor.
Example of a documentation package I keep for clients
- Charity’s name, EIN, and written acceptance of crypto.
- Blockchain transaction ID, date and time, and wallet addresses (donor and recipient).
- Exchange rate and screenshot of price at donor’s transfer time.
- Signed Form 8283 (if required) and copy of any appraisal.
- Charity acknowledgment letter for the donation.
Additional resources and internal references
- Form 8283 — Noncash Charitable Contributions (our in‑depth guide explains when appraisals and signatures are required): https://finhelp.io/glossary/form-8283-noncash-charitable-contributions/
- Donor‑Advised Funds (DAFs) — practical steps when using a DAF to give crypto: https://finhelp.io/glossary/donor-advised-funds-dafs/
- Charitable Contribution Carryover Rules — what to do if your deduction exceeds AGI limits: https://finhelp.io/glossary/charitable-contribution-carryover-rules/
Final checklist before you donate
- Confirm the charity is qualified and accepts crypto.
- Decide whether to donate directly or through a DAF/third party.
- Verify you’ve held the asset >1 year if you want to claim FMV.
- Capture the transfer record, FMV evidence, and a written charity acknowledgment.
- Plan for AGI limits and possible carryover if the gift is large.
Professional disclaimer: This article is educational and describes general rules and best practices as of 2025. It is not personalized tax or legal advice. For decisions that affect your tax return or estate plan, consult a qualified tax advisor or attorney who can evaluate your specific facts and applicable law (see IRS Publication 526 and Form 8283 instructions for official guidance).
