Bitcoin and other cryptocurrencies have revolutionized wealth creation, but they also present unique challenges when it comes to tax-efficient giving. If you have held Bitcoin (BTC) or other digital assets for a long time, you may be sitting on significant unrealized gains—gains that could lead to a hefty tax bill if you decide to sell.

Fortunately, there is a way to turn your crypto gains into lasting philanthropic impact while maximizing your tax benefits: donating Bitcoin to a Donor-Advised Fund (DAF).

In this blog, we’ll explore how Bitcoin holders can use DAFs to:
✔ Avoid capital gains taxes on appreciated crypto.
✔ Receive an immediate tax deduction based on the full fair market value.
✔ Support multiple charities over time while letting funds grow tax-free.

If you are a crypto investor looking to convert digital wealth into meaningful giving, this guide is for you.

Why Bitcoin Holders Should Consider Charitable Giving

Bitcoin’s price has historically been volatile, but long-term holders (or “HODLers”) have seen massive appreciation over the years.

Let’s say you bought Bitcoin at $5,000 per BTC, and today it’s worth $50,000 per BTC. If you sell, you’ll owe capital gains tax on your profits—up to 20% federal tax plus additional state taxes. However, if you donate Bitcoin directly to the UI Donor-Advised Fund, you can bypass those taxes and give more to charity.

Key Benefits of Donating Bitcoin to a DAF

🔹 Avoid Capital Gains Tax – If you sell Bitcoin, you pay capital gains tax. If you donate it to the UI DAF, the full pre-tax value goes to charity.
🔹 Receive a Charitable Deduction – You can deduct 100% of the fair market value of your Bitcoin (if held for more than a year) up to 30% of your adjusted gross income (AGI).
🔹 Grow Your Gift Tax-Free – Once in the UI DAF, your donated Bitcoin can be converted into cash and invested tax-free, allowing you to give more over time.
🔹 Support Multiple Charities – Unlike direct donations, the UI DAF lets you distribute grants to multiple charities at your own pace.

How Donating Bitcoin to a Donor-Advised Fund Works

Step 1: Transfer Bitcoin to the UI DAF Sponsor

The UI DAF accepts Bitcoin and other cryptocurrencies. You simply initiate a crypto transfer to the UI DAF’s wallet.

Step 2: DAF Converts Bitcoin to Cash

Once received, the UI DAF can continue to hold the Bitcoin or  liquidate the Bitcoin tax-free and credit your UI DAF account with the proceeds.

Step 3: Receive Your Tax Deduction

You receive a charitable tax deduction for the full fair market value of your Bitcoin on the date of donation (if held for over a year).

Step 4: Recommend Grants Over Time

Your UI DAF account allows you to recommend grants to your favorite charities whenever you choose—immediately or over several years.

Example: Bitcoin Donation vs. Selling for Cash

Let’s say you own 5 BTC that you originally purchased for $10,000 total. Today, it’s worth $250,000.

💡 By donating directly to a DAF, you avoid a $48,000 capital gains tax hit and give the full $250,000 to charity.

Why the UI Donor-Advised Fund is the Best Vehicle for Bitcoin Donations

1. Simplicity and Convenience

Managing direct Bitcoin donations to multiple charities can be complex—some nonprofits do not accept cryptocurrency, and others may struggle with liquidation. The UI DAF eliminates these issues by handling the crypto conversion in one easy step.

2. Tax-Efficient Giving Strategy

Because the UI DAF allows you to either continue to hold Bitcoin or to diversify your investment, your charitable dollars can grow tax-free, making  your donation even more valuable over time.

3. Flexibility in Grantmaking

Not sure where you want to donate immediately? No problem. Your funds stay in the UI DAF, allowing you to make grants over time while taking an immediate tax deduction.

4. Potential for Multi-Year Tax Planning

• If you are anticipating a high-income year, donating Bitcoin now can offset taxes while allowing you to distribute funds later.

• You can also carry forward unused deductions for up to five additional years.

How to Get Started with a Bitcoin Donation to the UI DAF

✅ Step 1: Set up a DAF account at University Impact

✅ Step 2: Transfer Your Bitcoin

Initiate a tax-free crypto transfer to the UI DAF’s Bitcoin wallet. 

✅ Step 3: Receive Your Tax Deduction

Claim a charitable tax deduction equal to the Bitcoin’s fair market value (determined by IRS guidelines).

✅ Step 4: Grant to Your Favorite Causes

Over time, you can recommend grants to charities of your choice—whether it is climate action, education, medical research, or humanitarian aid.

Final Thoughts: Use Your Bitcoin for Good

If you have benefited from Bitcoin’s rise in value, consider giving back in a tax-smart way. The UI Donor-Advised Fund is one of the best ways to turn crypto gains into meaningful, long-term impact while reducing your tax burden.

Why let capital gains taxes eat into your wealth when you can unlock its full potential for philanthropy?

💡 Ready to donate Bitcoin? Call us today and start making a difference with your digital assets.