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. If you’d like advice on the tax implications of donating cryptocurrency assets, please contact a ShindelRock tax professional .