Wait — cryptocurrency and nonprofits…all in the same sentence? Stick with us here, and you’ll soon understand why it makes a lot of sense (and literally, cents) for both donors and nonprofits. If you’re not familiar with cryptocurrency, Investopedia defines it as “a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.” Bitcoin, Litecoin, and Ethereum are perfect examples that you’ve likely heard of. These are forms of payment that essentially act like tokens and are typically used to buy and sell goods and services online. But, as more companies (like Starbucks and Lowe’s) accept crypto as a legitimate form of payment, nonprofits are following suit by accepting donations in crypto. The American Red Cross, UNICEF, and The Rainforest Foundation are just a few that now accept cryptocurrency donations. It’s a smart idea — and if you’re a nonprofit, we’re sharing three compelling reasons why you should consider it too.

Donors lower their capital gains exposure

In 2014 the IRS ruled that cryptocurrency should be treated as property for tax purposes. This means bitcoin and all other cryptos are subject to hefty capital gains taxes. So, if you purchased bitcoin ten years ago and used it today to pay for a cup of coffee at Starbucks, you’d have to figure out and pay (huge) capital gains taxes for that ridiculously small transaction.

The value of bitcoin itself has grown enormously over the years. To give you an idea, from 2013 to 2017, it appreciated twenty-five times its value. With that kind of ROI, many people don’t want to spend it on anything (much less a cup of joe). But, if it can’t be spent, what do you do with it? The optimal solution is donating it. Donors can give appreciated assets (like Bitcoin) directly to nonprofits without having to cash it out first. So, just like a stock donation, transferring cryptocurrencies to nonprofits results in zero capital gains tax for the giver. Zero capital gains tax is a huge win.

Donors claim a higher tax deduction

Donors benefit from a tax deduction standpoint too. When they donate their crypto directly to a nonprofit, it’s not considered a taxable event. That means they can take a charitable deduction for the full amount of their donated crypto’s fair market value. Yep — they can deduct 100% of it on their taxes. Now, had they sold their cryptocurrency first and subsequently bestowed the after-tax proceeds to charity, their donation and tax deduction would have been considerably less. So, claiming that higher tax deduction from a direct gift is an excellent way for donors to offset their other gains or income on their taxes.  

Nonprofits receive the full value of the donation

Like we mentioned above, directly-donated cryptocurrency gifts to charities are larger because they receive the maximum value of the contribution. Donors don’t have to sell their crypto first, take the tax hit, and then give the money to charity. Giving cryptocurrency directly to charity makes it easier (and more profitable) for everyone involved. It’s especially true since nonprofits don’t pay taxes on those donations either. It’s truly a win-win for everyone.

Does your nonprofit accept cryptocurrency donations? Why not ponder?

It’s easy to see why cryptocurrency donations are an innovative technology that offers nonprofits a unique competitive advantage. Have you toyed with the idea of using it for your nonprofit? With such considerable benefits, it’s worth exploring. The earlier you adopt it, the better. As a top outsourced accounting provider for nonprofits, we see many organizations leaning into this opportunity. Let’s talk and see if it might be a good idea for yours too. A consultation call with our friendly and knowledgeable team here at Qbix will cost you nothing but a bit of your time. Schedule yours today.

Share it! on Twitter on Facebook on Google+ on LinkedIn