MSTR Cat

Crypto Law/Level VII · Loopholes worth understanding/7.1 Legal planning/Lesson 4

Donating crypto to charity

Why giving appreciated coins directly to a charity is treated differently from selling them first, and the appraisal, limit and 2026 rules that decide the deduction.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Donate coins held over one year directly to a §170(c) charity: IRS FAQ 34 says no gain is recognized and FAQ 35 allows a deduction at fair market value; the catch is itemizing, with only gifts above 0.5% of contribution base deductible from 2026.
  2. For coins below basis, sell first and give the cash: the realized loss offsets gains and the cash gift is deductible, whereas donating the coin wastes the loss; coins held a year or less deduct only the lower of basis or value.
  3. Give to a public charity rather than most private foundations: §170(b)(1)(C) allows appreciated property up to 30% of contribution base with a five-year carryover, while §170(e)(1)(B)(ii) cuts a private-foundation deduction to roughly basis.
  4. Above $5,000 claimed, a qualified appraisal and Form 8283 are required (§170(f)(11)); CCA 202302012 denied a deduction that relied on an exchange price, so the appraiser’s fee is cheaper than losing the deduction. Get written acknowledgment for gifts of $250 or more.
  5. Non-itemizers gain nothing extra by giving coins: the 2026 non-itemizer deduction of up to $1,000, or $2,000 joint, covers cash only. In the UK, giving cryptoassets to a charity is not a taxable disposal.

MaterialsIRS Virtual Currency FAQs 34 to 37 on charitable donationsIRS Chief Counsel Advice 202302012 (January 2023) on qualified appraisals for cryptocurrencyIRS Form 8283 (Noncash Charitable Contributions) and its instructions26 U.S.C. §170 on law.cornell.edu

Wonder

  1. Why do some people give coins to charity instead of selling them and giving cash?
  2. Is the price on an exchange enough to value a large crypto donation?
  3. Do I get any deduction for a crypto donation if I do not itemize?

Explore

  1. In US federal tax a donation of crypto to a qualified charity is not a sale. IRS Virtual Currency FAQ 34 says a donor to an organization described in 26 U.S.C. §170(c) recognizes no income, gain or loss on the donation. FAQ 35 sets the deduction: generally the fair market value at the time of the gift if the coins were held more than one year, and the lower of basis or fair market value if held one year or less. So long-term appreciated coins can produce a deduction for their full value while the built-up gain is never taxed to anyone, since the charity is generally exempt.
  2. Compare selling first. A holder who sells long-term coins and donates the cash pays capital gains tax on the sale (lesson 7.1.1) and then deducts the cash. Giving the coins directly skips the first step. The comparison flips for coins worth less than their basis: donating them gives a deduction only for current value and the loss is never realized, while selling first realizes the loss (lesson 7.1.2) and leaves cash to give. And for coins held a year or less, the deduction is capped at basis, so the appreciation earns no deduction (lesson 7.1.7 explains how lot choice decides which coins left).
  3. Limits apply. For appreciated long-term property given to a public charity, §170(b)(1)(C) caps the deduction at 30% of the donor’s contribution base, essentially adjusted gross income, with the excess carried forward for five years. Gifts to most private foundations are worse: §170(e)(1)(B)(ii) reduces the deduction by the long-term gain, leaving roughly basis. The exception for ‘qualified appreciated stock’ in §170(e)(5) covers stock with readily available market quotations, and a typical coin is not stock. The type of recipient, not only the coins, therefore shapes the result.
  4. Valuation is where crypto donors most often stumble. Under §170(f)(11), a deduction of more than $5,000 for property requires a qualified appraisal, and above $500,000 the appraisal must be attached to the return. In Chief Counsel Advice 202302012, released in January 2023, the IRS concluded that cryptocurrency is not among the readily valued assets exempt from appraisal, that an exchange price does not substitute for one, and that relying on it does not meet the reasonable-cause exception, so the deduction was denied. The charity generally signs Form 8283 for gifts over $5,000 and must file Form 8282 if it disposes of the coins within three years.
  5. Pub. L. 119-21, the 2025 tax law, changed charitable deductions for tax years beginning after 31 December 2025. A new §170(b)(1)(I) allows itemized charitable contributions only to the extent they exceed 0.5% of the contribution base. A revised §68 trims itemized deductions for taxpayers whose income reaches the 37% bracket, by 2/37 of the smaller of those deductions or the income above the bracket’s start. A new deduction for people who do not itemize, up to $1,000 ($2,000 joint), covers cash only, IRS guidance says; stock, other property and gifts to donor-advised funds do not qualify. Crypto donations therefore help only donors who itemize.
  6. A donation must also be accepted. Not every charity can receive coins, and some use intermediaries that convert them on arrival; the donor needs a contemporaneous written acknowledgment for any gift of $250 or more (FAQ 36). Other countries differ: UK guidance lists gifts of cryptoassets to a charity, like gifts to a spouse or civil partner, as an exception to the rule that giving tokens away is a taxable disposal. A practical check before any donation: note the lot’s acquisition date, basis and current value, whether you expect to itemize, and, above $5,000, who will prepare a qualified appraisal. This lesson explains the rules; it does not recommend a gift.

Key facts

  • IRS Virtual Currency FAQ 34 says donating virtual currency to a §170(c) charitable organization does not trigger income, gain or loss for the donor.
  • Under FAQ 35, the deduction is generally fair market value for virtual currency held more than one year, and the lesser of basis or fair market value if held one year or less.
  • Section 170(b)(1)(C) caps deductions for capital gain property given to public charities at 30% of the contribution base, with a five-year carryover.
  • In CCA 202302012 the IRS concluded that a crypto donation claimed above $5,000 needs a qualified appraisal and that an exchange-reported value does not satisfy the requirement.
  • For tax years beginning after 31 December 2025, §170(b)(1)(I) allows itemized charitable contributions only to the extent they exceed 0.5% of the contribution base.
  • The non-itemizer charitable deduction of up to $1,000 ($2,000 joint) that begins in 2026 covers cash contributions only, not crypto or other property.

Exercise nine, six, three, one

9CollectList up to 9 coins or lots you hold or have studied that could be donated, with acquisition date, basis and current value.
6ClusterSort them into 6 categories: long-term and appreciated, short-term and appreciated, below basis, over $5,000 in value, intended for a private foundation, and records incomplete.
3DistillReduce the 6 categories to 3 groups: lots where a direct donation and a sale-then-gift would be treated differently, lots where they would be treated alike, and lots needing an appraisal or adviser review.
1CrystallizeWrite 1 sentence explaining, in your own words, why donating an appreciated coin differs from selling it and donating the cash.

Fact check

Dates, figures and claims checked against the published sources listed below.

Open in the interactive academy →

PT ES ZH JA KO RU DE FR MS