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Donations of cryptocurrency have soared along with the price of Bitcoin and other digital assets. In 2021, Fidelity Charitable investors donated more than $330 million in cryptocurrency, more than 12 times the amount given in 2020, according to a recent report.

In 2021, Bitcoin, the largest cryptocurrency by market capitalization, saw its price reach an all-time high of $67,000 (it's now trading around $40,000). Not surprisingly, Bitcoin accounted for most (80%) of crypto donations to Fidelity Charitable, followed by Ethereum (11%) and Litecoin (1%). A non-profit organization independent of Fidelity Investments, Fidelity Charitable distributed a total of $10.3 billion last year.

There are many ways you can give cryptocurrency to your favorite charities. One way is to work with an organization like Fidelity Charitable, which administers donor-advised funds.

Heres how it works: You set up a Giving Account through Fidelity Charitable online with no minimum investment. Then you transfer the Bitcoin or other currency from your crypto wallet to your Fidelity Charitable account. The crypto you donate to Fidelity Charitable will be converted into cash. (Keep in mind that some investing apps don't currently let you transfer crypto from their platform to another, while others, like Coinbase, will charge you to do so.)

You can then choose when Fidelity Charitable will send the money to a non-profit of your choice. If you don't want to donate right away, you can invest the money in various securities, including ESG funds, mutual funds that own stocks of companies with favorable track records on environmental and social factors. Earnings grow tax-free in your account until they're donated.

Another option for donating cryptocurrency is to work with companies like The Giving Block. This organization helps nonprofits accept cryptocurrency donations. It also links crypto donors to different charities. According to its latest report, The Giving Block took in a total donation volume of more than $70 million in 2021, or an increase of 1,558% from 2020. Moreover, NFT projects donated $12.3 million to charities via The Giving Block.

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Donating crypto to charity can also save you on taxes. When you sell an asset such as a stock or crypto coin for more than you bought it for, you typically owe a capital gains tax on the difference. The rate ranges from 0% to 37%, depending on your income and how long youve held the investment. (Short-term capital gains, levied on assets held for a year or less, are generally taxed at the same rates as ordinary income.)

So if you bought $10,000 worth of Bitcoin and sold it for $25,000, youd owe a capital gains tax on $15,000. But if you donated it to an eligible nonprofit, youd avoid a capital gains tax on your donation.

Plus, you may be able to deduct the donation from your federal income tax bill. Daniel Rodriguez, an accredited investment fiduciary and chief operating officer at Hill Wealth Strategies, a wealth management firm in Richmond, Virginia, says that if youre taking the standard deduction, then you won't also get a charitable deduction by selling cryptocurrency. Only people who itemize their deductions are allowed to deduct charitable contributions on their federal income tax return.

If you owe more than $10k in taxes, Tax Relief can allow you to break down your debt into payments.

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Before you decide to donate cryptocurrency to charity, make sure the recipient accepts crypto. And if it does, make sure the organization has a means to convert it to cash quickly and easily. Cryptocurrency is a highly volatile asset, and wild price swings can mean the charity benefits from less than you initially donated.

Organizations like Fidelity Charitable and The Giving Block convert your crypto donations into cash as soon as possible and transfer it to charities. Fidelity Charitable currently accepts only Bitcoin, Ethereum and Litecoin. The Giving Block accepts these three, as well as Dogecoin and any cryptocurrency supported by the Gemini exchange.

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Crypto Donations to Charity Rose More Than 1000% Last Year - Money