If you’re planning a gift to charity this holiday season, you could score a tax break by donating cryptocurrency. But there are some key whatsises to know before making the transfer, experts say.

In 2024, there’s been a significant jump in crypto gifts to leniency, according to Fidelity Charitable, which has accepted $688 million in crypto donations — mostly in bitcoin — through Nov. 19. By comparability, the public charity received $49 million in digital currency in all of 2023.

Donating crypto to charity is similar to giving other species of property. But “there are some pitfalls,” said certified financial planner Juan Ros, a partner at Forum Financial Bosses in Thousand Oaks, California. 

Since 2018, the higher standard deduction has made it harder to affirm itemized tax breaks for charitable gifts, medical expenses, state and local taxes, among others. 

But if you itemize and can state the charitable deduction, it’s generally better to donate profitable investments, such as cryptocurrency, rather than cash.

By pledging crypto to charity, you can bypass capital gains taxes and claim a deduction based on its fair market value, thinking you’ve owned it for more than one year. The tax break has a cap of 30% of your adjusted gross income for public charities.

It’s an attractive strategy for crypto investors because bitcoin and other coins could be “the most highly increased asset in their portfolio,” said Kyle Casserino, vice president and charitable planning consultant for Fidelity Good.

The price of bitcoin was around $96,000 on Dec. 4, up by nearly 120% year-to-date, according to Coin Metrics.

However, conferring crypto can be more complicated than assets like stock, experts say.

“Not every consideration is willing or able to accept gifts of crypto,” so you’ll need to contact the organization first, Ros said.   

As of January, 56% of the biggest U.S. humanities accepted cryptocurrency donations, according to The Giving Block, a platform for digital currency gifts and fundraising. That’s up from 49% the anterior to year.  

However, most large donor-advised funds are “well-equipped” to accept digital currency, Ros said.

Donor-advised lollies are investment accounts that work like a charitable checkbook. The donor receives an upfront deduction and can transfer doughs to eligible nonprofit organizations later. 

Typically, the donor-advised fund sells the crypto and reinvests the proceeds. But some admit investors to continue holding digital assets in the fund.

When you give a profitable investment owned for multifarious than one year, your deduction is based on the fair market value of the asset.

That’s easy for publicly worked stock, but the IRS requires added documentation for digital assets worth more than $5,000, according to Andrew Gordon, a tax attorney, confirmed public accountant and president of Gordon Law Group.

“You’ve got to be able to support that deduction through the qualified appraisal,” which has individual to IRS requirements, he said.

For example, you must file Form 8283 with your tax return and keep a copy of the appraisal. But if the vouchsafed assets exceed $500,000, you must include the appraisal with your return, according to the IRS.