A gift of bitcoin, the computer-driven online money system, can be an excellent way to support Partners In Health. In Febuary of 2015, the I.R.S. announced that it would treat bitcoin as property rather than a currency thereby putting bitcoin on a track to becoming a true financial asset. This decision makes bitcoin subject to capital gains taxes.
A gift of bitcoin may be right for you if:
- You own bitcoin that you bought at least one year ago.
- The bitcoin has grown significantly in value since you bought them.
- You want to save income taxes or capital gains taxes.
- You would like to make a gift to Partners In Health.
How It Works
You transfer your bitcoin to Partners In Health. We either can either hold your bitcoin, or sell it and use the proceeds.
You can save income tax and capital gains tax when you give bitcoin that you have owned for a year or more.
Income tax benefit
If you have held your bitcoin for more than one year, you may deduct from your taxable income the full fair market value of your bitcoin as of the date of your donation, regardless of what you paid for them. Your deduction is limited to 30% of your adjusted gross income. You may, however, carry forward any unused portion of your deduction for up to five additional years.
Capital gains tax benefit
When you donate bitcoin that have increased in value, and you have owned the bitcoin for more than one year, you do not have to report any of your capital gain. If you were to sell these bitcoin yourself, you would owe capital gains tax on the difference between the sale price and the amount you paid for them.
Should I give my bitcoin or sell them and give the proceeds?
You should give your bitcoin directly to Partners In Health. This way, you will avoid paying tax on any capital gain you have in your bitcoin. If you sell your bitcoin first and then give us the proceeds, you will have to pay capital gains tax on all of your capital gain, an unnecessary and potentially substantial cost to you.
What happens if I give bitcoin that I bought less than one year ago?
The charitable deduction available for property you have owned for 12 months or less, so-called "short term capital gain" property, is limited to either its current full value or what you paid for it, whichever is less. In this case, your deduction is limited to 50% of your adjusted gross income rather than the usual 30%. For example, if you give bitcoin worth $10,000 that you purchased nine months ago for $6,000, your charitable deduction will be $6,000, not $10,000.
Is it easy to make a gift of bitcoin?
Yes. Whether you plan to give one bitcoin or one thousand shares, it is easy to give your bitcoin to us.
Consult with us before making your gift
It is important that you discuss with us the bitcoin you are considering for donation before you make your gift. We want to be sure that we can accept it. Also, we will want to discuss with you what will happen to your property once we receive it. We want to be sure we will be able to carry out your wishes. This discussion will also help you anticipate the likely tax benefits of your gift.
Mike Harty invested in bitcoin when it was first introduced in 2009. His digital wallet has a current fair market value of $100,000. He is pleased with his investment but he often stays up late at night worried that he bitcoin value will fall to zero. He is thinking it may be time to divest.
A devoted supporter of Partners In Health for many years, Mike is looking to make a large donation. He could support PIH by writing a check, however he would be able to save more in taxes by giving his bitcoin instead. After reviewing his plans with his investment advisor, Mike decides to give all $100,000 of his bitcoin to PIH. He paid just $5,000 for the bitcoin when he bought them in 2009.
- Mike will earn an income tax charitable deduction of $100,000, which will save him $39,600 (39.6% tax).
- He will avoid tax on $95,000 of capital gain, which will save him an additional $19,000 (20% tax).
- He will gain the satisfaction of making a $100,000 gift to Partners In Health.