As the Holiday Season rolls around with Mariah Carey playing on repeat over the radio, many are in a generous mood and donate to causes they believe in. It’s also a good time to get any last minute donations in before the end of the year for tax purposes. If you are one of those many who donate, here is one effective strategy to maximize your giving while reducing taxes paid.
Per IRS Publication 526, you can generally deduct the total value of Capital Assets (investments like stock or crypto held for longer than 1 year) donated to a qualified organization. Since you’re donating these assets directly, you also do not need to pay capital gains tax on them. Note, this is different from selling your investment and then donating the proceeds, in which case you would need to pay capital gains tax.
To donate your crypto or stock directly, you should check if the organization accepts stock or crypto donations. If they do, their website generally contains instructions on how to donate your stock or crypto. They may also generate all the tax forms necessary to file your taxes properly. Many of the larger non-profit organizations accept stock as donations, but ere is a list of organizations that accept cryptocurrency.
Some caveats with donating assets like stock or crypto are:
- For the tax deduction, you can donate up to 30% of your Adjusted Gross Income (AGI) when donating Capital Property like crypto. You can donate up to 50% of your AGI for publicly traded stock.
- You must hold the asset for at least 1 year before donating. Otherwise, you may not be able to deduct the full value of your donation from your taxes.
- If you donate more than $5,000 of a non-publicly traded stock or cryptocurrency, you’ll require an appraisal. Processors like engiven give free appraisals, but you should check whether the donation processor offers appraisals before donating.
- Form 8283 must be filled out for any non-cash donations over $500.
Now that you know of this little trick, I hope you can partake in this wonderful season of giving. If there is other content you’d like me to write about or are interested in, let me know in the comments!
Disclaimer: The contents in this post may not be accurate at the time of reading and does not constitute as financial or tax advice. Please consult with a tax professional for any advice regarding taxes.