We welcome back a special guest: Stelter’s Senior Gift Planning Consultant, Lynn M. Gaumer, J.D., to share her take on the in-the-news cryptocurrency values.
In March 2020, Bitcoin was trading around $5,000. Even with its recent downturn, it was trading around $35,000 at the time of this writing.
What type of assets do you think of when you hear “asset-based philanthropy” or “gifts of non-cash assets?” I suspect appreciated stock or real estate comes to mind. Time to expand your thinking to include Bitcoin and other cryptocurrencies.
Bitcoin isn’t for everyone. But for those individuals who invested in Bitcoin or other virtual currency prior to Jan. 1, 2021, it’s likely worth a lot more than they paid for it. Bitcoin is still one of the best performing assets over the past five to 10 years. Many investors have a very low-cost basis and should evaluate the tax implications before cashing in.
Data varies, but estimates say that 10 to 15% of Americans currently hold Bitcoin. (Compare that to about 12% of individuals who invest in gold.) About half of that was invested in the last year. About 74% of Americans are open to the idea of owning cryptocurrency in the future. According to Fidelity Charitable, donations of cryptocurrency to DAFs rose from $13 million in 2019 to $28 million in 2020.
Now that I have your attention (and perhaps wishing you had invested in Bitcoin at the beginning of the pandemic), you realize that these assets have the potential to be a great gift to your organization. Let’s take a look at some questions you may have.
What are the tax benefits for a donor?
The IRS now treats cryptocurrency as property, which means that investors qualify for an income tax charitable deduction for the fair market value of the gift, up to 30% of their adjusted gross income (AGI) with a five-year carryover. If they have held their cryptocurrency for more than a year, they also avoid the capital gains tax that they would have paid if they sold it.
Who is my target audience?
Most Bitcoin users are males age 18 to 45. According to Forbes and Digital Market News, 87% are under 55 (57% are age 26 to 40 and 30% are age 41 to 55). The current hotspots are San Francisco, Los Angeles, New York, Seattle and Chicago.
How many nonprofits accept crypto?
In 2018, the Chronicle of Philanthropy estimated that between 500 and 1,000 charities accepted cryptocurrency. Over the last year, the number of nonprofits accepting Bitcoin or other cryptocurrency donations has doubled. I expect the upward trend to continue.
My organization isn’t ready to accept cryptocurrency; how can I still take advantage?
Let the experts help. Organizations such as The Giving Block and Charitable Solutions, LLC can accept cryptocurrency on behalf of your organization. They will sell it and transfer the proceeds to you.
Tip: Does your gift acceptance policy address cryptocurrency? If not, update it to address this gift type.
Have a Cryptocurrency Success Story?
We’d love to hear how your organization realized these highly valuable gifts of assets.