Why consider donating stock or crypto during market volatility

When markets swing, charitable donors face two basic choices: sell appreciated assets and donate the cash, or donate the asset itself. Donating appreciated stock or cryptocurrency you’ve held for more than one year usually eliminates the capital gains tax you’d owe if you sold the asset, and — for gifts to qualified public charities — lets you deduct the asset’s fair market value on your tax return (subject to AGI limits). That combination can increase the net value delivered to the charity while lowering your taxable income, which is especially valuable during volatile markets when large year-to-year income swings may magnify the tax benefit.

Authoritative guidance from the IRS treats cryptocurrencies as property for tax purposes and applies the same basic rules to crypto gifts as to other appreciated property (IRS: Charitable Contributions; IRS: FAQs on Virtual Currency). See Publication 526 and Form 8283 instructions for reporting details.

Key tax rules you must know (2025)

  • Holding period matters: If you’ve held the security or cryptocurrency for more than one year (long-term), you can generally deduct its full fair market value at the time of donation. For assets held one year or less, the deduction is generally limited to your cost basis.
  • AGI limits: Gifts of long-term appreciated property to public charities are generally deductible up to 30% of your adjusted gross income (AGI). Cash gifts to public charities are subject to a higher limit (60% AGI). Excesses may be carried forward for up to five years. (IRS Publication 526)
  • Capital gains avoided: Donating appreciated property avoids realizing the capital gain, so you generally do not pay capital gains tax on the appreciation when you transfer the asset directly to the charity.
  • Reporting: Noncash contributions require documentation. For noncash gifts over $500, Form 8283 is required. Appraisals may be necessary for higher-value items. Publicly traded securities typically don’t require a formal appraisal because market quotes establish value.

Sources: IRS Publication 526, Form 8283 instructions, and IRS guidance on virtual currency.

Typical donation flow and practical steps

  1. Confirm the recipient can accept securities or crypto. Not every nonprofit can or wants to accept digital assets — check before initiating a transfer.
  2. Determine holding period and value. For stock, use the closing market price on the donation date. For crypto, use a reliable exchange price or the charity’s valuation policy; document the source.
  3. Use the charity’s transfer instructions. Many charities provide DTC instructions for securities and either a custodial wallet or third-party processor instructions for crypto donations. Large donor-advised funds and some brokerages accept crypto directly but follow their process.
  4. Obtain written acknowledgement. For any donation of $250 or more, get a contemporaneous written acknowledgement showing the date, description of the asset, and whether any goods or services were provided by the charity.
  5. File required tax forms. For noncash gifts over $500 file Form 8283. If an appraisal is required, follow the Form 8283 instructions.

Tip from practice: When I’ve worked with clients who donate crypto, we confirm the charity’s process first and request written confirmation of the exact transfer (transaction hash for crypto) because valuation and substantiation are more likely to be scrutinized.

Examples that show the math

Example A — Donating long-term appreciated stock:

  • Basis: $10,000
  • Current market value: $50,000
  • If you sold the stock: you’d recognize $40,000 of long-term capital gain and owe tax on that gain.
  • If you donate the stock directly: you generally avoid the capital gains tax and may deduct $50,000 (subject to AGI limits). Net tax savings depend on your tax bracket and AGI limits, but you typically increase the economic value to the charity by the tax that would otherwise have been paid.

Example B — Donating crypto (same structure applies):

  • Crypto basis: $5,000
  • Current value donation date: $20,000
  • Donating directly avoids recognition of $15,000 gain and may let you deduct $20,000 if held >1 year.

Contrast if the asset is depressed: if the stock or crypto has fallen below your basis, it usually makes more sense to sell the loss and donate the cash — you realize the tax loss to offset gains or ordinary income (within limits) and still give the same economic amount to charity.

Timing and volatility considerations

  • If you expect prices to fall sharply, donating before the decline locks in the larger deduction and avoids future gains. If you expect prices to recover quickly, you may prefer to hold.
  • Donating crypto during periods of high intraday volatility can create valuation ambiguity. Use the charity’s stated valuation method and document the time and price source used to set fair market value.
  • If you have a big one-time gain year (e.g., crypto vesting, business exit), consider bunching gifts into a donor-advised fund (DAF) so you get the deduction in the high-income year but distribute grants to charities over time. See our guide on donor-advised funds for details: Donor-Advised Funds: How They Work (https://finhelp.io/glossary/donor-advised-funds-how-they-work/) and a step-by-step on bunching: Bunching Donations with Donor-Advised Funds: Year-by-Year Guide (https://finhelp.io/glossary/bunching-donations-with-donor-advised-funds-year-by-year-guide/).

Vehicle choices and strategic ideas

  • Direct gift to a public charity: Best when you want the charity to receive the asset immediately and the charity is equipped to liquidate securities or accept crypto. Ideal for high-value gifts to a mission you support.
  • Donor-Advised Fund (DAF): A DAF accepts the gift now (giving you the immediate tax deduction) and allows you to recommend grants to charities later. DAFs are especially useful for tax smoothing during volatile or high-income years. See the linked DAF resources above for practical steps.
  • Private foundation: Less commonly used for small donors due to administrative cost and different tax rules (lower AGI deduction limits for appreciated property).

Common mistakes to avoid

  • Donating before confirming the charity accepts crypto or your specific token.
  • Missing documentation: no transfer receipt, no transaction hash, or no contemporaneous acknowledgement by the charity.
  • Donating short-term holdings expecting a long-term deduction — verify holding period.
  • Forgetting AGI limits and the need to carry forward excess deductions properly.

Documentation and reporting checklist

  • Charity acknowledgement letter (required for $250+ gifts).
  • Broker or transfer agent statement showing the date and amount for securities donations.
  • Transaction hash and exchange source for crypto donations, plus any intermediary custodian receipts.
  • Form 8283 (noncash gifts) if required.
  • Keep records of basis, acquisition date, and valuation method for at least the IRS recommended retention period.

When donating depreciated assets is better

If the asset’s market value is below your cost basis, you can usually get a greater tax benefit by selling the asset first, harvesting the loss, and donating the cash proceeds. Donating the depressed asset transfers the loss to the charity — which they can’t use — so you lose the tax benefit of the loss.

Issues specific to cryptocurrency

  • IRS treatment: Cryptocurrency is taxed as property. Donating crypto follows the same tax logic as gifting appreciated securities — long-term holdings allow a fair market value deduction; short-term holdings are limited to basis. (See IRS FAQs on Virtual Currency.)
  • Exchange/custodial complications: Many charities use third-party processors or exchanges to accept crypto; these intermediaries will often convert crypto to cash for the charity and provide the necessary donor receipt.
  • Volatility and valuation: Use time-stamped, exchange-quoted prices and preserve screenshots or API data showing the price at donation time.

Practical checklist before you donate

  1. Confirm charity’s acceptance policy and transfer instructions.
  2. Verify holding period (>1 year) for full fair market value deduction.
  3. Get written confirmation of the transfer (receipt, transaction hash, or broker statement).
  4. Prepare Form 8283 if required and retain appraisal or valuation support as instructed.
  5. Discuss with your tax advisor or CPA to ensure the gift fits your tax plan.

Further reading and authoritative sources

Final notes and professional disclaimer

Tax-smart giving using stock or cryptocurrency is a powerful tool to increase your philanthropic impact while optimizing taxes — but it requires careful documentation, timing, and adherence to IRS rules. In my practice I’ve found donors get the best results when they (1) confirm the recipient’s acceptance procedures, (2) document the transfer at the time of donation, and (3) coordinate the gift with their tax advisor so AGI limits and filing requirements are handled correctly.

This article is educational and does not substitute for individualized tax, legal, or financial advice. Consult a qualified tax advisor or attorney about your specific situation before executing large or complex charitable gifts.