For those of you who hold Bitcoin, or any other cryptocurrency, did I get your attention? First off, you must be a charitable person. If you would rather ONLY spend all your crypto profits on yourself, then stop reading, this is not for you. Have you seen the movie, “The Grinch Who Stole Christmas?” Just wondering…
Oh, I’m so glad you are still reading. That must mean you have a heart much larger than the Grinch. You care about others and their misfortunes and are willing to put some of your own wealth into a position to help others less fortunate than you. At this point, you still need more than a large heart, you need to have something to give, and today, we’re talking about crypto wealth. Right now, it’s all on paper as long as you haven’t sold anything. So far, so good.
Now, before I get into some details, I must first alert you to the need to be keeping very good records on your crypto purchases. Today, we want to focus on those cryptos that you can show you purchased more than a year ago. Those are usually the ones that you will have the largest built-in gains on, which makes what I’m about to show you even better.
By donating your Bitcoin (or other cryptocurrency) to a qualified charity, as long as you’ve held it for more than one year, you get to deduct the current value as a charitable contribution on your tax return. There are some rules you need to follow. First, you are limited to a maximum of 30% of your Adjusted Gross Income. Second, you need to be itemizing, instead of just taking the standard deduction.
Let me give you an example: Let’s say you hold some Bitcoin that you purchased back in early 2020 for $30,000 and today, it’s worth $40,000. If you sold it, you would pay tax, at Capital Gains rate on that $10,000 gain, resulting in a tax (at 20%) of about $2,000. BUT, if you donated that $40,000 Bitcoin, you would get a charitable deduction of $40,000. In our example, you already have enough other deductions to be taking actual itemized deductions, instead of the standard deduction. Let’s also assume that your top tax rate is 28% and that your Adjusted Gross Income is well over the 30% limitation. Your tax savings could be about $11,200.
I’ve got some great news. This kind of charity deduction isn’t limited to cryptocurrency, it can be any capital asset that you have held for at least one year. Stocks, bonds, land, etc. Now get out there and be charitable!
Have you heard? Prov 14:21 says, “Whoever despises his neighbor is a sinner, but blessed is he who is generous to the poor.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com. Also on Facebook.