Bitcoin Donations and IRS Form 8283 Questions

I'm considering giving away over $5000 in bitcoins to a charity, but I'm a bit lost on how to fill out IRS form 8283, particularly the section about getting the donation appraised. Has anyone gone through this process before? Just a heads up, I prefer to donate the bitcoins directly instead of selling them first since that way I can dodge taxes on the donated amount.

Firstly i am not american netizen but im curious about this so in there when you want to donate you should fill out form  why you just deposited into their address anonymously just tell the charity owner

Donations to charities reduce your income tax in the U.S., so I can give more -- basically the amount plus all the taxes I would have had to pay. For example, Selling $5000 worth of bitcoins would cost me $500 in taxes, so only $4500 would be left for the charity. On the other hand, giving $6667 worth of bitcoins and deducting the donation from my income would save me $1667 in taxes, so my cost is still $5000. The difference is that all the money goes to the charity and none goes to the IRS.

*not tax advice* I understand that the appraised fair market value would be the price of bitcoin times the number of bitcoin you are donating. My advice would be to contract with a tax professional who is familiar with your individual tax situation to help you fill out this form.

If it were only that simple ...

The basis for my suggestion is as follows: As mentioned previously, I would suggest contacting a tax professional with knowledge of your specific tax situation who can give you individualized tax advice. It may come down to you having to file your taxes a certain way, and seeing how it plays out in court if there is no prior precedent. I would be surprised if there is case law regarding donations of bitcoin.

Is there a difference in your acquisition cost to the value now? I'm wondering if they would require you to pay on the potential gain. Taxes  became one of the reasons I don't transact as much as I did in the beginning.

good thinking. this hadn't occurred to me as a way to reduce my tax liability when bitcoin goes to the moon next year. i see 2 solutions. the first one is easy---donate $5000 or less worth and you can avoid using a qualified appraiser. the second solution is to hire an appraiser who is familiar with cryptocurrency. i came across 2 such firms: https://charitablesolutionsllc.com/virtual-currency-appraisals/ https://cryptoappraisers.com/ i'm curious how it works out. let us know what you end up doing.

Hmm I read the instructions for filling out the form for 8283 and all I can say is Wow they really don't make any sense for cryptocurrency donations especially the ones that aren't labelled as security since only securities are exempted from the appraisal requirement. For me it is really dumb to get your Bitcoin's appraised by someone as the certain amount of Bitcoin you will be donating already has been valued by the global market which I think eliminates the need of an appraiser, maybe there is some kind of exemption we don't know about since I doubt this hasn't been a concern before.

I've done this.  You need an appraiser. E.g. https://cryptoappraisers.com/  (like ... maybe you can get away without one, but that seems ill advised.) You can do it somewhat more efficiently if you're going to make many donations to do a large amount at once to a Donor Advised fund, e.g. Fidelity Chartable and then make further donations out of the trust-- because then you just have a single bitcoin donation. It's also advantageous to make a larger amount of donations in the same tax year because you can't write off the donation while using the (now pretty large) standard deduction-- so it's better to donate all at once in one year, don't use the standard deduction in that year, and then in other years continue to use the standard deduction.

Thanks, Greg. That is helpful. I was hoping to do it this year (meaning this week), but it looks I'm going to be too late because of the complexity of the process. Also, it really bothers me that the IRS requires me to pay someone a ridiculous amount of money to say that the donation is worth $X in their expert opinion, when all they did was copy down a number from coinmarketcap.

$120 for a single donation (https://cryptoappraisers.com) isn't ridiculous---that's significantly less than 1 hour of billed time from a competent CPA. considering you're avoiding any capital gains taxes and also deducting the entire amount of the donation, $120 seems like an afterthought, especially if you're donating higher amounts. gifting long term capital gain property = extremely lucrative tax breaks. if they just allowed large untaxed noncash donations without any documentation, that could be abused left and right, so they put the onus on the taxpayer to prove it.

While $120 won't break the bank, it is still ridiculous. It is a rent-seeking rate. The appraiser benefits from the regulation rather than any skill or expertise that they might have. You don't need an hour of a competent CPA's time to look up the price on coinmarketcap. Furthermore, a self-reported value cannot be abused because the IRS can easily check it. Also, note that in the first link you provided, they charge $600. Thank goodness there is a "low-cost" alternative.

Only way I know how is the fiat kind of donation. Never had the experience to donate in bitcoin. Ask those that will be involved, like your accountant, financial adviser that should be a fiduciary, and a lawyer. Asking for this thing on the Internet is pretty risky because not everyone has the same experience.

i agree, and i reckon that's why there is an exemption for publicly listed securities. the regs obviously weren't written with bitcoin in mind. i'd like to think that exemption will eventually be expanded to include cryptocurrencies, though i wouldn't hold my breath. considering the detail required on form 8283 and the legal liability they are taking on, i'm curious---what do you think a fair price would be?

All they would have to do to fix it would be to extend the regulation from security to any property traded in a regulated market. There is no good reason for restricting it to a security. If we assume that an independent appraisal is necessary, I think a fee similar to what is charged by a notary would be reasonable since the activity is similar. Notaries charge between $2 and $20.

I set up an account at Fidelity Charitable and donated some bitcoins. That all went fairly smoothly, although it did involve some emails and phone calls. Then, I portioned out the funds from Fidelity's sale to a few charities. I paid $120 for the appraisal -- that was a legally-required waste of money. I got lucky and the bitcoins were sold at the the top, so the appraiser just used the sale price.