How to Donate to Charity Using Bitcoin

18

FEB,2018

First of all, what form should your donation take? Should you sell your holdings for U.S. dollars or donate bitcoin – or another crypto currency – directly?

Bitcoin's price is extremely volatile. Wallets and exchanges used to hold the cryptocurrency have a history of being hacked. Compliance is tricky. Regulators have yet to catch up, and the regime they'll eventually settle on is anyone's guess. For these and other reasons, your average charity probably prefers donations in fiat currency

But Evan Fox, a manager in the tax department at Berdon LLP, argues that making your donation using bitcoin is preferable to cashing out. "Let's say you bought [bitcoin] for $1,000 and it's worth $10,000. Now if you were to sell it, you would have $10,000 in cash. You would have recognized a $9,000 gain." Depending on your jurisdiction, "taxes on that could be 35%, if not slightly more. So if you take 35% off $10,000, you're left with $6,500 in cash."

If you give directly in bitcoin, on the other hand, your donation will be tax-free, and not even the steepest fees paid to miners and payment processors such as BitPay could bring the value of the donation down as much as taxes would. The price of bitcoin could drop steeply, but few charities are likely to hold donations in the form bitcoin for very long.