Cryptocurrency adoption is on the rise. About 14% of Americans, or 21 million people, own digital assets—a figure expected to double in the next year. Crypto is also the best-performing asset class of the last decade, with digital investments like Bitcoin beating out the stock market by close to 1,000%. And don’t forget its skyrocketing value. The price of Bitcoin alone soared nearly 70% last year.
Factor in the benefits to donors and it makes sense that more Americans than ever are giving gifts in the form of cryptocurrency to charities.
At Phoenix Children’s, it’s all part of our commitment to offer our donors new and innovative ways to give, so you can help make world-class health care available to children across Arizona and beyond.
The 4 biggest benefits of donating cryptocurrency
The COVID-19 pandemic and resulting economic impacts have driven many nonprofits to reconsider their traditional fundraising platforms. For many charities, that’s meant getting into crypto philanthropy. Giving Tuesday 2021 saw cryptocurrency donations rise 583%—and the number of participating nonprofits spike 839%—compared to Giving Tuesday 2020.
“The reason nonprofits come to us to accept crypto is because of the tax incentives,” says Pat Duffy, co-founder of The Giving Block. “Just like there are millions of Americans who are incentivized to donate stocks, there are now millions of Americans more incentivized to donate crypto.”
1. Tax savings
For the uninitiated, crypto donors in the United States avoid capital gains taxes. That’s because the IRS designates cryptocurrency as property and subjects it to the same rules that apply to noncash gifts, like gifts of stock or real estate. That means that, for the most part, donating your crypto can save you more on taxes than making a cash donation. It is important to note, though, that donors must file an IRS Form 8283 with their tax return for gifts over $500 in value, and they must obtain a qualified appraisal for gifts over $5,000.
2. Speed and security
Donating Bitcoin and other cryptocurrencies directly to Phoenix Children’s only takes minutes, meaning you can almost immediately verify we received your gift. That’s much faster than traditional transaction methods like credit card payments, which can take days to process and clear.
Also, because blockchain ledgers rely on networks of thousands of computers for their verifications, crypto transactions are very secure.
3. Guaranteed anonymity
If you want to give anonymously, you still can with crypto—and still receive a receipt for your donation.
4. Greater value and impact
When donating crypto, you can choose to leave a charitable gift to Phoenix Children’s in your will. Or you can use digital assets to fund charitable gift annuities. Gift annuities help you avoid capital gains tax, receive a tax deduction and even create a retirement income stream.
Over time, these types of donations can appreciate in value far beyond their initial worth at the time of the gift.
“For crypto owners, donating cryptocurrency just makes sense,” says Kristen Jaarda, J.D., LL.M., CAP, a philanthropy executive, advisor and nonprofit attorney in Washington, D.C. “It’s an easy way to support a cause you love while avoiding taxes (capital gains and income taxes) and even possibly receiving income benefits if you use your gift to fund a charitable remainder trust or gift annuity.”
How to donate cryptocurrency
Once the gift is received, we’ll either convert the cryptocurrency gift into dollars by selling it on a digital asset exchange or hold it as an investment.
First, make sure you’ve owned your cryptocurrency—whether it’s Bitcoin, Ethereum or any of the other thousands of crypto types on the market today—for more than one year. That ensures you’ll receive a tax deduction based on fair market value when you donate it
Second, if you haven’t already, set up a digital wallet to hold your digital assets. This wallet is an app you can download on your computer or phone to securely receive and transfer crypto funds.
Third, transfer your donation through your digital wallet and confirm we’ve accepted it.
The latest form of cryptocurrency, NFTs, or non-fungible tokens, burst onto the scene in March 2021. At that time, Christie’s auction house sold the first-ever NFT artwork—a collage of images by digital artist Beeple—for $69.3 million. NFTs have since captured cultural attention as a source for celebrity and athletic partnerships, and a major fundraising vehicle for nonprofits.
NFTs are built on the same technology as other digital currencies, like Bitcoin and Ethereum. But, unlike their crypto predecessors, NFTs are a kind of deed associated with a digital work of art, like an image or video, that establishes ownership.
Many NFT artists are charitably minded and have donated a portion—up to hundreds of thousands of dollars and even millions of dollars—from their NFT sales to nonprofits.
If you’re ready to make a crypto gift to Phoenix Children’s, we can help you get started.