Now, there is an easy method in which the investors of the cryptocurrency can do two things – lower the taxes and give back to the community in need. If you want to save money on taxes then there are a few policies that you being a crypto-savvy trader can do like tax-loss collecting and capital loss deduction on the loss of cryptos. But if you are a philanthropic and savvy crypto trader and you are looking to reduce the crypto taxes and also help the society at the same time, then you should think of donating the cryptocurrency or gifting it.
Reducing Taxes through Crypto Donations –
Now, many people have this common question in mind, like how do the crypto donations help reduce the taxes. One of the things that you should know is that donating or gifting a cryptocurrency is non-taxable. It is as per the guidelines of the IRS. So, when you have donated or gifted your crypto assets you will not find any kind of gains in that event. You can also think about this alternative situation – you cashed your cryptocurrency for USD and donated this Fiat to the choice of your charity. In this case, you will have to pay the capital gains tax on the crypto gains which can differ from 10 to 72% if you held assets for under one year, and it will be from 0 to around 20% if you held assets for over 1 year and it also depends on your income.
Itemized Charitable Deductions –
When you make a donation of your crypto directly to charitable organizations, you will not have any taxes on the gains when you file for the tax. And, one of the things that you should know is that donations to qualified charities are deductible by the tax. If you hold the cryptocurrency for more than 1 year before donating them, then you will have to be eligible for an itemized charitable deduction for the true market value of the cryptos at the time when you make donations. You will still be eligible for itemized charitable deductions if you donate the cryptocurrency after holding it for even a lesser year or less than 1 year. You will not be able to do many deductions as the deductions are equal to less cost basis in the online currency.
IRS and the Deductions –
You should also note that IRS identifies the difference between gifts and donations to the charities that are qualified. If you want to claim this deduction then make sure that you are donating to a charitable organization that is a qualified one. Other kinds of gifts like crypto crowdfunding, and graduation presents are not eligible and there can be no deduction.