Cryptocurrency has taken off as a means to purchase goods and services, while its use as a vehicle for charitable donations has grown rapidly as well. Nonprofits can leverage this trend by notifying donors about this giving method and optimizing giving forms to accommodate it.
Tax-Efficient Donations
Cryptocurrency is considered property by the IRS, so donating cryptocurrency directly to a nonprofit may be one of the most tax-effective ways of supporting charity. Donors avoid capital gains tax they would otherwise incur when selling and donating crypto assets as proceeds for charity purposes.
Donors who hold their crypto investments for more than a year and itemize their deductions may also deduct the full fair market value of the donation from their taxes. Proper documentation must be maintained in order to claim these tax benefits.
With such significant tax advantages associated with cryptocurrency donations, more people are using it as a method to give back. Donors can find charities that accept crypto donations on platforms like The Giving Block and Engiven.
New Pool of Donors
Crypto donors present nonprofits with an untapped audience that they should exploit with the right tools. Nonprofits will need to build up knowledge and create an infrastructure necessary to engaging this new donor pool effectively.
Nonprofits may benefit from getting additional support and marketing support to attract a wider range of donors than would otherwise come through cash donations alone. Furthermore, gifts of appreciated assets like stocks or cryptocurrency usually have greater total values than cash donations from individual donors.
Cryptocurrency users tend to be highly connected and cause-driven. Donating their cryptocurrency can save them capital gains taxes while receiving an equitable market value tax deduction.
Transparent Donations
Nonprofits who accept cryptocurrency can open themselves up to new donors who might otherwise not donate – especially younger donors from diverse demographic backgrounds.
Stock and crypto donations tend to be much larger than cash donations from donors of equal size, providing nonprofits with an effective means of increasing fundraising growth by taking advantage of major gifts that would otherwise go unacknowleged.
However, nonprofits must also be prepared to navigate the complex nuances associated with cryptocurrency philanthropy. This requires setting clear gift acceptance policies, considering ways to deal with cryptocurrency market volatility and donor anonymity issues that complicate gift substantiation, as well as potential cyber attacks or security risks that might occur when accepting cryptocurrency gifts.
Security
Cryptocurrency transactions tend to be much cheaper than their credit card and bank transfer counterparts, helping nonprofits reduce costs while maximizing donations that go toward fulfilling their missions.
As cryptocurrency markets recover from recent sell-offs, donors are turning to alternative ways of supporting their favorite causes. According to The Giving Block, stablecoins have now become the top-rated currency for donations while NFTs now account for 20%-30% of overall donation volume.
One way for charities to accept cryptocurrency and NFT donations is through working with a donor-advised fund (DAF). DAFs act as middlemen, accepting cryptocurrency donations from donors, cashing them out, reinvesting it, and then dispersing funds to nonprofit organizations – providing nonprofits that don’t possess the technology, staff or knowledge required for accepting crypto donations themselves with an option for accepting crypto donations directly.
Marketing
Cryptocurrency may be best-known as an investment vehicle, but it’s also an invaluable way to donate charitablely. Cryptocurrency offers significant tax advantages while simultaneously tapping into new demographics of donors while streamlining operational costs.
Cryptocurrency transactions tend to be significantly cheaper than their credit card or wire transfer counterparts, allowing more of the donated funds to reach their intended destination.
Nonprofits looking to take full advantage of cryptocurrency donations should familiarize themselves with them and be prepared to inform donors interested in them about them, with ready communication templates on social media, text messaging and emails ready for use. It is also vital that staff including gift officers and marketers learn the lingo, so they are ready when answering inquiries about crypto donations.
