Overview

Donating cryptocurrency has moved from niche to mainstream as charities and platforms increasingly accept digital assets. For U.S. taxpayers the IRS treats virtual currency as property (see IRS Notice 2014‑21), so gifts of crypto follow the same broad tax rules that apply to donations of other appreciated property. That creates important tax planning opportunities — and specific documentation and valuation obligations you must meet to claim a deduction.

This article summarizes the tax rules, practical steps, common pitfalls, and recordkeeping you’ll need to donate cryptocurrency effectively and compliantly. It also links to related guides on FinHelp for more technical topics.

Key tax rules in plain language

  • IRS classification: The IRS treats cryptocurrency as property, not currency, for federal income tax purposes (IRS Notice 2014‑21). That means gains from selling crypto are capital gains and charitable gifts are noncash property contributions.
  • Deduction value: If you donate crypto you’ve held for more than one year (long‑term capital gain property) directly to a qualified public charity, you generally can deduct the asset’s fair market value (FMV) on the donation date, subject to AGI limits. See IRS Publication 526 for details.
  • AGI limits: Gifts of appreciated long‑term property to public charities are typically limited to 30% of your adjusted gross income (AGI). If you exceed that limit you can carry forward the unused portion for up to five years.
  • Short‑term holdings: If you held the crypto one year or less before donating, your deduction generally is limited to your cost basis (what you paid), not fair market value.
  • Private foundations and other recipients: Different limits apply for donations to private foundations (commonly 20% of AGI for appreciated property). Confirm the recipient’s tax status before assuming deductibility.

Sources: IRS Notice 2014‑21; IRS Publication 526 (Charitable Contributions); Form 8283 instructions.

Documentation and filing requirements

  • Charity acknowledgment: For any gift of $250 or more you must get a written acknowledgment from the charity showing the date and a description of the gift and whether you received any goods or services in return.
  • Form 8283 (Noncash Charitable Contributions): If your total noncash donations for the year exceed $500 you must complete Form 8283 and attach it to your tax return. For noncash gifts valued over $5,000 (including crypto) complete Section B of Form 8283 and follow appraisal rules.
  • Appraisals: The IRS generally requires a qualified appraisal for noncash gifts over $5,000 unless the property is publicly traded securities. Cryptocurrency is not treated the same as listed securities, so be prepared to follow appraisal guidance or use reliable exchange pricing and a qualified appraisal when required. See Form 8283 instructions for specifics.
  • Fair market value (FMV): FMV is the price a willing buyer would pay a willing seller on the donation date. For crypto, many taxpayers use an average of major exchange prices (UTC) or the charity’s valuation method if it accepts crypto donations via a processor. Keep screenshots, wallet transaction records, and a clear timestamp.

How charities accept crypto — practical routes

  • Direct wallet transfers: You can send crypto from your wallet to a charity’s wallet address. The charity must be set up to receive and properly account for crypto. Always verify the wallet address directly with the charity (not via email links you can’t confirm).
  • Third‑party processors: Many nonprofits use services (e.g., The Giving Block, Coinbase Commerce, or other crypto donation processors) that handle custody, conversion, and receipts. These services often convert crypto to fiat and issue acknowledgements showing FMV and date — which simplifies donor paperwork.
  • Brokerage or exchange donations: Some exchanges offer a direct charitable giving feature that transfers crypto to an approved nonprofit and issues tax receipts. If you use an exchange, save transaction confirmations and the receipt.

Practical note: Not all charities can accept crypto. Check the nonprofit’s donation page or contact its development office. Larger organizations and many community foundations now accept crypto; smaller groups may not.

Sample scenarios (clarify the benefits)

  • Long‑term appreciated asset donated directly: You bought 1 BTC for $1,000 and it’s worth $10,000 when donated to a public charity. You avoid capital gains tax on the $9,000 appreciation and (subject to AGI limits) can generally deduct the full $10,000 FMV.
  • Selling then donating: If you sell the BTC first and donate the cash, you incur capital gains tax on the sale and the deduction is for the cash amount. Direct donation is usually more tax‑efficient for appreciated crypto held long‑term.

Valuation examples and timing

  • Date of donation matters: Use the value at the moment the charity receives the asset (timestamped blockchain transfer or exchange confirm). The FMV method should be consistent: document the exchange(s) and average price used.
  • Record: Include transaction IDs, wallet addresses, exchange screenshots, and any receipts from processors. These records back your FMV claim if the IRS questions your deduction.

Common pitfalls and how to avoid them

  • Donating to an ineligible organization: Confirm the recipient is a qualified 501(c)(3) using the IRS Tax Exempt Organization Search before donating. Gifts to individuals, political campaigns, or foreign charities generally aren’t deductible.
  • Missing Form 8283: If your noncash donations exceed $500 and you don’t file Form 8283, the IRS may disallow the deduction. File the form and attach any required appraisals for donations over $5,000.
  • Poor valuation or lack of timestamp: Without verifiable FMV and time evidence the IRS may disallow the full deduction or reclassify your donation. Keep exchange histories and wallet transaction IDs.
  • Security risk: Sending crypto to a wrong address is usually irreversible. Verify addresses carefully and consider using a processor or exchange donation flow that reduces user error.

Special vehicles: donor‑advised funds and private foundations

  • Donor‑advised funds (DAFs): Donating crypto to a DAF lets you take the tax deduction in the year of the gift while recommending grants to charities over time. DAFs commonly accept crypto and handle liquidation and recordkeeping. If you’d like a primer, see Donor‑Advised Funds: Flexible Philanthropy Explained on FinHelp (https://finhelp.io/glossary/donor-advised-funds-flexible-philanthropy-explained/).
  • Private foundations: Rules differ and deduction limits for appreciated property are lower; foundations have their own compliance and excise tax concerns. Consult a tax advisor for large gifts.

Interlink: deeper FinHelp resources

State tax and other considerations

  • State deduction rules vary: Some states decouple from federal rules or have different carryforward periods. Check state tax guidance or talk to a state‑licensed tax professional.
  • Foreign charities and cross‑border gifts: Gifts to foreign organizations often aren’t deductible for U.S. federal taxes unless the charity qualifies under IRS rules. Use U.S. intermediaries (DAFs, U.S. community foundations) if you want to support international causes and seek a federal deduction.

Practical checklist before you donate

  1. Confirm the recipient is a qualified 501(c)(3).
  2. Decide whether to donate directly, use a DAF, or route through an exchange/processor.
  3. Verify the charity’s crypto acceptance method and required address or processor link.
  4. Capture timestamped blockchain evidence, exchange price data, and screenshots.
  5. Get a written acknowledgment from the charity for gifts ≥$250.
  6. If your noncash gifts exceed $500, complete Form 8283 and get appraisals if >$5,000.
  7. Consult your tax advisor to confirm AGI limits and carryforward options.

Final notes and professional disclaimer

Donating cryptocurrency can be tax‑efficient when done correctly, but mistakes in valuation, recipient eligibility, or paperwork can jeopardize a deduction. In my experience helping clients donate digital assets, the most common errors are incomplete documentation and donating to organizations unprepared to accept crypto. Use processors or DAFs when in doubt; they reduce administrative burden and improve compliance.

This article is educational and does not constitute tax or legal advice. Tax laws and IRS guidance change. Consult a qualified tax advisor or attorney about your specific situation.

Authoritative sources and further reading

  • IRS Notice 2014‑21: Tax Treatment of Virtual Currency (IRS.gov)
  • IRS Publication 526: Charitable Contributions (IRS.gov)
  • Form 8283 and Instructions: Noncash Charitable Contributions (IRS.gov)
  • IRS Tax Exempt Organization Search (to verify charities)

(Links above summarize the current federal rules as of 2025. Always confirm the latest IRS guidance before acting.)