Appraisal requirement may cause some to rethink charitable donation of cryptocurrency
In January 2023, the IRS announced that taxpayers will not be eligible for a charitable contribution deduction if they donate digital assets valued over $5,000 without obtaining a qualified appraisal.
Despite digital assets potentially having a value listed on exchanges akin to publicly traded securities, they do not fall under the IRS definition of a security. This definition is specifically reserved for corporate stock, certain stock rights, bonds, debentures, notes, certificates, or other forms of indebtedness issued by corporations or government entities.
As stated in the IRS guidance, digital assets also do not fit into other categories of property that can be easily valued without requiring a qualified appraisal. Therefore, when claiming a charitable contribution deduction exceeding $5,000 for digital assets, taxpayers must obtain a qualified appraisal from 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.
