Philanthropic efforts provide necessary resources for a number of community and global improvement causes. Generous donors who make contributions to such causes create opportunities for those less fortunate. In addition to leaving a lasting legacy, charitable contributions also provide substantial tax benefits for the donor. In most cases, the fair market value of a charitable gift counts toward tax deductions.
Types of Charitable Donations
Cash donations are still very common, but there are several other assets that count toward tax deductible gifts. Real property, including homes and acreage, offer physical meeting places that can be used for shelter, treatment, or administrative purposes.
Cryptocurrency as a charitable donation is also quickly becoming a viable trend among benefactors. Donating cryptocurrencies such as Bitcoin and Ethereum to public charities provides several benefits for the donor as well as the receiving organization.
Ways to Make Charitable Gift Donations
Historically, gift donations in the form of company stock, private or municipal bonds, and other securities were a two-step process. First, donors sold off specific shares or units of a particular security and then donated the proceeds from the sale to their preferred qualifying charitable organization.
This process required two separate transactions, several days for the settlement process, and left the actual donation amount to chance based on market conditions. New options for direct transfers of securities from an individual or trust to a charity have made it much more efficient to donate assets to a worthy cause.
Donor Advised Funds
Tax benefits of long term appreciated assets donated to public charities with the 501(c)(3) designation are strategic for both the benefactor and the charitable organization. Donor Advised Funds (DAFs) are accounts established by a charity that allows donors to contribute non-cash assets directly to the organization. Funds may be used immediately or may remain invested in the market and paid out in the form of grants over a specific time period. Directly transferred assets are not subject to capital gains taxes at the time of the donation.
Appreciated non-cash assets such as Bitcoin and other cryptos can be transferred to charitable organizations without the donor paying taxes on the appreciated value. Tax deductions to the benefactor are based on the fair market value of the cryptocurrency. Fair market value is based on the appraisal of a qualified reviewer.
As with charitable donations of other securities, cryptocurrency donations are received by the organization at their full and current value. While most charitable organizations now accept the transfer of non-cash assets, not all have the capability to accept cryptocurrency. This is likely to change in the near future.
Our experienced team can accurately appraise charitable contributions, regardless of the preferred investment vehicle. Contact us today!