This is post is taken from the Frequently Asked Questions.
Donating a highly appreciated asset, like bitcoin, is one way to reduce federal taxes and be able to direct more of that money to a charity that you support.
Let’s say you purchased $5,000 worth of bitcoin and it is now worth $55,000.
Option 1: You sell the bitcoin holding and pay a 20% capital gains tax on the proceeds, which would total $10,000. You could then donate the post-tax cash (and claim a tax-deduction for the same amount) of $45,000.
Option 2: You donate the entire amount to a nonprofit, pay $0 in capital gains taxes, and the full $55,000 goes to the charity. The donor could then claim a federal income tax deduction of the full $55,000.
As with any donation, you only get the tax deduction if you are itemizing. A tax strategy that you could use is to group multiple years worth of itemized deductions into a single year in order to get the tax benefit of the donations for that year. Please refer to your tax professional to see if that makes sense to you.
At the moment, it is the responsibility of the donor to collect the necessary forms for taxes. You will not be receiving an end-of-the-year form from The Waters.
If you itemize and you have donated more than $500 and wish to claim a federal tax deduction then you have to submit IRS Form 8283. This is where noncash contributions are tracked. If the total aggregate amount is less than $5000, then the donor can report the fair market value on Form 8283 himself.
If the total amount exceeds $5,000, then the IRS currently requires an independent qualified appraiser to decide on the Fair Market Value of the gifts. The donor or donee is not allowed to declare this himself.
After a qualified appraiser fills out Form 8283, both the donor and donee sign it and then the donor is able to count the qualified amounts as a tax deduction.
If you fall into this donation category, reach out to me on The Waters Church Sartell Bitcoin Donation group. I would recommend using the appraisal services from https://cryptoappraisers.com. Randy (randytarpey (@) hksickler.com) charges a flat $120 for a single appraisal and an additional $180 for up to 20 appraisals.
Randy will need the date of the bitcoin donation, the amount (in sats or bitcoin), and the date/time. There are a couple of forms that have been put together that you can use to input that data and include on your email to him. Excel, PDF, Numbers.
The appraisal generally costs $120-300. You’ll have to look at the amount of bitcoin donations you did and decide if it is worth paying the appraisal fee to otherwise get the full tax deduction.
If you donate more than $1,500 of bitcoin a year, then paying for the appraisal is worth it. 20% of $1,500 is $300.
The Waters Church
EIN No. 20-2838385
1227 Pinecone Rd N, Sartell, Minnesota, 56377