The Tax Math on Donating Crypto to Your Family Foundation #
Your Bitcoin went from $10,000 to $100,000. You want to fund your family foundation. The wrong move costs you $20,000 or more in unnecessary taxes. The right move costs you nothing extra and gives you a deduction.
Most people sell the crypto first, take the tax hit, then donate the cash. That’s backwards. You just paid capital gains on the entire appreciation and handed that money to the IRS instead of your foundation. If you’re in the 20% long-term capital gains bracket plus the 3.8% net investment income tax, you lost 23.8% of the gain before the money even hit your foundation.
The tax-efficient move is donating the appreciated crypto directly to your family foundation. You bypass capital gains entirely, you get the charitable deduction based on fair market value, and the foundation receives the full asset to sell or hold. The foundation itself is tax-exempt, so when it sells the crypto, there’s no tax due.
Here’s where execution matters. Most family foundations cannot hold cryptocurrency directly for the same custody reasons that affect charitable remainder trusts. Traditional custodians aren’t equipped to hold digital assets. The clean solution is an LLC wrapper. You transfer the crypto into an LLC, then transfer the LLC membership interest to the foundation. The foundation now owns the LLC, the LLC holds the crypto, and custody stays with D’Cent or another qualified digital asset custodian.
This isn’t just theoretical tax savings. On a $90,000 gain, donating directly saves you over $21,000 in capital gains tax compared to selling first. That’s $21,000 more in your foundation to deploy toward your charitable mission. And you still get the deduction for the full fair market value of the donated asset.
The control piece matters too. Your family foundation gives you and your family ongoing say in how those assets get deployed. You’re not just cutting a check to someone else’s organization. You’re building something that can involve multiple generations in grantmaking decisions and philanthropic strategy.
But running a foundation is real work. You need investment management for the assets inside the foundation. You need to coordinate with tax planning to maximize your deduction timing. You need estate planning that accounts for how the foundation fits into your broader wealth transfer strategy.
Digital Wealth Partners provides the wealth management and investment advisory services that make sense for standard situations. They handle asset custody, financial planning, and the fiduciary-level guidance that keeps your investment strategy aligned with your foundation’s needs. For foundations with straightforward grantmaking and clear investment objectives, that’s typically sufficient.
When you’re coordinating multiple charitable structures, dealing with complex digital assets, managing multi-generational family involvement, and integrating this with business succession planning, you need family office coordination. Digital Ascension Group handles that level of complexity. They’re managing tax strategy oversight across your entire structure, coordinating estate and succession planning, and providing the concierge-level financial coordination that high-net-worth families need when philanthropy becomes part of a larger wealth management ecosystem.
The difference between donating $100,000 in crypto and donating $78,000 in cash (after taxes) is just knowing which structure to use and executing it correctly.
Contact Digital Ascension Group to learn how our family office services can coordinate your complete financial picture.
