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Abstract

Understanding the tax implications surrounding donations in various forms is crucial. Here’s a simplified guide to help you navigate taxability related to gifts of stock, cash, crypto, and NFTs. Remember, it’s essential to consult with a tax professional for personalized advice as Endaoment does not provide financial or tax advice.

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Gifts of Cash*

Cash donations are straightforward. You can typically deduct cash gifts in full, up to a cap set by the IRS.

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Gifts of Stock*

When you donate stocks, the tax deduction is usually based on the fair market value of the stocks at the time of donation. If held for over a year, you can avoid capital gains tax and potentially deduct the full market value. For stocks held for less than a year, the deduction may be limited to the cost basis.

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Overview of Digital Asset Taxability*

Primarily, the IRS treats crypto as an asset subject to its rules on capital gains and losses, similar to stocks or property. The original purchase price becomes the cost basis, and you’re taxed on the difference between the cost basis and the sale price, influenced by the holding duration (short vs long term).

Donating cryptocurrency to qualified charitable organizations while itemizing your deductions can potentially claim a tax deduction. For assets held longer than a year, the deduction usually equals the fair market value at the time of donation. Short term held assets might be associated with deductions equal to your cost basis.

Donor Fundamentals: Taxability

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IRS Form 8283*

For donations exceeding $500 of cryptocurrency to a charity within the tax year, Form 8283 is required alongside your tax return for reporting and deducting. Donations over $5,000 necessitate a qualified appraisal. Endaoment does not provide appraisals but recommends contacting qualified appraisers like Charitable Solutions LLC or Stout. Once appraised, send the documentation to admin@endaoment.org for sign-off on Form 8283, which can then be included in your tax filing.

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NFT Donations*

NFT donations are nuanced from a tax perspective and always require an appraisal. NFT donations can be categorized into creators splitting NFT proceeds at mint, and holders donating NFTs from their wallet. For specific scenarios not outlined here, please reach out!

For creators, splitting proceeds at the contract level directly to a nonprofit like Endaoment may result in lower tax obligations. Conversely, receiving assets before donating might create tax liability and extra steps.

For NFT holders, the holding duration affects deduction amounts, similar to crypto donations. Always, an appraisal is required for NFT donations.

Note that crypto donations generate automatic receipts, but NFT donations do not. For NFT gift substantiation, email us at admin+NFT@endaoment.org.

We hope this guide sheds light on the taxability of crypto and NFTs. Again, consult with financial professionals for tailored advice. If you need referrals to crypto-savvy professionals, feel free to ask!

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Automatic Donation Tagging on CoinTracker

Endaoment has teamed up with CoinTracker to automatically tag crypto donations to nonprofits and our donor-advised funds (DAFs). Thanks to CoinTracker 2.0’s automatic transaction labeling, every onchain contribution made through Endaoment is accurately recorded as a donation in their UI for easy reporting. Read more here and we hope this feature makes giving and taking deductions* a bit easier.

Cointracker Automatic Tagging

Helpful Resources:

Endaoment does not offer financial advice. Consult your CPA, financial advisor, or attorney for tax obligation queries. The information in this article is for informational purposes only.

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