A cryptocurrency is a form of digital money that is decentralized and based on blockchain technology. Although you may be aware of the most well-known versions, Bitcoin and Ethereum, there are over 5,000 distinct cryptocurrencies in use. Transactions on the blockchain are irreversible due to the manner they’re recorded, making them easy to track and almost hard to copy or counterfeit.
Cryptocurrency coins are digital, encrypted, and decentralized medium of trade. It had taken the world by storm, especially since the covid hit when many people were laid off and were left without a means of income. With the right strategies, people made fortunes, and a pretty significant number even donated to charity. So, if you are willing to donate some crypto, hang on till the end of this article.
All About Crypto, Nonprofits, and Philanthropy
Cryptocurrency has changed how we look at money and give fundraisers a new dimension. Let us look at its impact.
Accepting cryptocurrency might bring in a new set of donors.
For many crypto owners, crypto represents a new source of money. With the quick rise in value, a new group of people has emerged who have a lot of money in crypto but not in cash. As more individuals invest in cryptocurrency, they are increasingly likely to realize significant returns and wish to donate some of their money to charity in a tax-efficient manner. If NGOs can make it simple to donate cryptocurrency, they will tap into a growing sector of wealthy contributors.
Accepting valuable assets like cryptocurrency might help raise funds.
Accepting non-cash donations, regardless of organization size or industry, boost nonprofit fundraising growth. When looking at growth over five years, NGOs that solely take monetary donations expand by just 11%. Organizations that accept valued securities (stocks and real estate) grew by 66%.
Many cryptocurrencies, such as Bitcoin, have seen rapid value increases, prompting many cryptocurrency owners to cling to them as valuable assets. If NGOs successfully obtain these donations, it will have a significant influence on their fundraising growth.
Crypto contributions might assist you in receiving more significant donations from the same individuals.
The IRS classifies cryptocurrencies like property when contributing to NGOs, allowing contributors to avoid capital gains tax and take advantage of income tax deductions. A capital gain is a difference between the asset’s initial purchase price and its current worth.
This means that donating bitcoin costs less than selling cryptocurrency and giving cash to the same people. Because contributors pass on the tax advantages, gifts of valued assets like stock and cryptocurrency are typically bigger than cash donations (even from the same donors).
Tax Friendly Gifts- Cryptocurrency
The advantages of gifting cryptocurrency are strikingly comparable to those of conventional assets such as stocks or real estate.The federal government can tax a gain of up to 20% if a contributor sells cryptocurrency that has risen in value. A capital gains tax is the term for this. The current value subtracted from the acquisition price equals a capital gain of an asset. When the owner contributes the cryptocurrency instead, they avoid the tax and receive a tax deduction for the amount donated.
If the donor wants to continue committed to the cryptocurrency after gifting, they may instantly acquire more tokens or coins with cash. This allows them to take on the current market value and saves them money on future capital gains.
Donors who contribute bitcoin, unlike conventional assets, do not have to go through the transfer process with a brokerage. This saves time by removing the need for documentation. Furthermore, high broker costs might be associated with stock and real estate contributions, although most crypto platforms offer lesser fees than a credit card transaction. The twist is that if a donor wishes to provide a cryptocurrency gift valued more than $5,000, the IRS needs the donation to be assessed (like property).
How to accept cryptocurrency as a nonprofit?
Create an account on a crypto exchange.
You’ll need to open a crypto wallet or a crypto payment processor account to accept cryptocurrency. Yuan Pay is among the most popular payment processors. Such systems enable you to receive cryptocurrency donations and automatically convert them to US dollars.
While some NGOs want to keep their cryptocurrency in the hopes of seeing it appreciate, the majority prefer to pay it out immediately. If you don’t, the gift’s value might tumble, possibly to zero. Cryptocurrency prices may change dramatically even within a single day, so paying them out straight away is safer. It will also assist you in avoiding any accounting problems between the amount of the donation and the actual cash received.
If you open a crypto wallet instead of using a payment processor that instantly converts your funds to cash, you should keep an eye on it daily so that you may sell the tokens or coins as soon as possible. You may also send your contributors to Crypto for Charity, a new platform that accepts cryptocurrency donations and instantly converts them to cash for your charity.
Put a donation button on your website for cryptocurrencies.
Put a contribution link and form to your charity page once you’ve figured out how to take crypto. Cryptocurrency users are often young, tech-savvy, and unlikely to phone or contact you. The simplest method to secure these contributions will be to make it easy to give online.
Save the Children maintains a donation website dedicated to crypto contributions to educating its contributors. They discuss the advantages of contributing to cryptocurrency and links to resources where donors may learn more or donate.
To avoid anonymous contributions, collect donor information.
For many traders, the secrecy of crypto is appealing. When purchasing tokens or coins, buyers are not required to submit any personal information. Their wallet address and transactions are all stored in long strings of letters and numbers that have no direct connection to their identity.
Nonprofits, on the other hand, face challenges from anonymous donations. It’s difficult to appreciate, manage, or even give the appropriate tax receipts for these donations. When making a digital contribution, have contributors fill out a form with their contact information to avoid these issues. Giving someone a cause to do something (such as supplying their contact information) makes them more likely to do it.
It’s always a good idea to give back to society, and when gifting comes with a cause and an add-on benefit of saving on taxes, why not start doing the same at the earliest!