Appraisal requirement may cause some to rethink charitable donation of cryptocurrency

  • July 5, 2023
  • ShindelRock

In January 2023, the IRS advised that taxpayers will be denied a charitable contribution deduction for a donation of digital assets in excess of $5,000 without a qualified appraisal.

While digital assets may have a value listed on an exchange similar to publicly traded securities, they do not meet the IRS definition of a security, which is limited to corporate stock; certain stock rights; or a bond, debenture, note, certificate, or other evidence of indebtedness issued by a corporation or a government or political subdivision. Nor are they included among the other types of readily valued property for which no qualified appraisal is required, the guidance stated. Thus, for purposes of a charitable contribution giving rise to a deduction of more than $5,000, digital assets require a qualified appraisal by a qualified appraiser.

Appraisals can be expensive, and there is the risk that the report does not hold up to IRS standards if flagged for audit down the road. ┬áIf you’d like advice on the tax implications of donating cryptocurrency assets, please contact a ShindelRock tax professional.