Donor-Advised Fund
A charitable-giving account that lets a donor contribute assets, including appreciated crypto, claim an immediate tax deduction, and recommend grants to charities over time.
A donor-advised fund is a charitable-giving vehicle, administered by a sponsoring charitable organization, that lets a donor contribute assets — including appreciated cryptocurrency — into the fund, generally claim an immediate tax deduction for the contribution's value, and then recommend grants out of the fund to specific charities over however long a period the donor chooses, rather than needing to decide on specific charitable recipients at the moment of the original contribution.
Donating appreciated crypto directly to a donor-advised fund, rather than first selling it and donating the cash proceeds, can let a donor avoid realizing the capital gains tax that selling the crypto would otherwise trigger, while still generally claiming a deduction based on the asset's fair market value at the time of donation — making this a commonly used strategy for crypto holders with significant unrealized gains who want to support charitable causes. The specific tax treatment and deduction limits can vary by jurisdiction and by the donor's individual circumstances.
Examples
- A crypto holder with significant unrealized gains might donate appreciated tokens directly to a donor-advised fund, potentially avoiding the capital gains tax that selling the tokens first would have triggered.
- A donor-advised fund lets a donor claim an immediate tax deduction upon contribution while deciding which specific charities to support with grants from the fund later.