Swap First or Donate Directly? The Tax Maths
For US donors, how you give crypto can change your tax bill by more than the fees involved. Donating a coin you have held for over a year is usually the most tax-efficient way to give, while swapping into another coin first can create a tax bill. A coin that has lost value is the exception. This page works through the numbers.
By Global Relief Group · Last updated:
About these examples
These are simplified US examples to show how the rules interact. They assume you itemize deductions and ignore state taxes, the 3.8% net investment income tax, the 2026 rule that only charitable deductions above 0.5% of your adjusted gross income count, and income limits. This is not tax advice; check your own situation with a tax professional.
The rules behind the maths
- A swap is a disposal. The IRS says that if you exchange digital assets for other property, including other crypto or stablecoins, you recognize a gain or loss, which is a capital gain or loss if you held the coin as an investment.
- New coins start a new clock. Coins you receive in a swap have a cost basis equal to their market value at the time of the swap, and their holding period starts the day after you receive them.
- Long-held crypto is deducted at market value. If you have held it for more than a year, your deduction is generally its fair market value when you give it, and you generally don’t pay capital gains tax on the rise in value.
- Short-held crypto is deducted at the lower of cost and value.
- Capital losses can offset income. Losses first offset gains, then up to $3,000 a year of other income ($1,500 if married filing separately), with any excess carried forward.
- Gifts over $5,000 need an appraisal. If you claim a deduction of more than $5,000 for donated crypto, the IRS requires a qualified appraisal and Section B of Form 8283. Without it, the deduction can be refused. The exemption for publicly traded shares doesn’t cover crypto.
Example 1: a coin that has gone up
You hold LINK that cost you $2,000 three years ago and is now worth $10,000. You are in the 24% income tax bracket and pay 15% on long-term gains. You want to give $10,000.
| A. Donate BTC you already hold instead (same numbers) | B. Swap the LINK to BTC, then donate the BTC | |
|---|---|---|
| Tax on the swap | $0: no swap | $8,000 gain × 15% = $1,200 |
| Your deduction | $10,000 (held over a year: market value) | About $10,000 (held under a year: the lower of cost and value, and your cost is the swap value) |
| Tax saved by the deduction at 24% | $2,400 | About $2,400 |
| Net tax effect | $2,400 saved | About $1,200 saved ($2,400 − $1,200) |
The cause receives about the same in both cases, but swapping first costs you around $1,200 in tax, plus swap fees. If you hold a coin we accept that has also gone up, giving that one instead is usually the better route. If you don’t, it may still be worth giving through the swap; the deduction remains. Both options here are gifts of more than $5,000, so either one needs a qualified appraisal to claim the deduction.
Example 2: a coin that has gone down
You hold a coin that cost $10,000 and is now worth $4,000. The IRS’s charitable giving publication (Pub. 526) says that when you give property worth less than you paid, your deduction is limited to its current value, and you can’t deduct the difference. If you donate the coin itself, the $6,000 loss is never used.
| A. Donate the coin as it is (if we accepted it) | B. Swap it to USDC, then donate the USDC | |
|---|---|---|
| Loss you can claim | $0: lost | $6,000 capital loss realised by the swap |
| Your deduction | $4,000 | $4,000 (USDC’s cost is the swap value) |
| Tax value of the loss | $0 | Offsets other gains, or up to $3,000 of income a year |
This is the one case where converting first is usually the better choice, even for a coin we do accept.
If you have held the coin for a year or less
Gains on crypto held for a year or less are taxed at your ordinary income rate, not the lower long-term rate, so swapping a short-held coin that has risen can cost more. And if you donate it directly, your deduction is limited to the lower of what you paid and its current value. If your coin is close to the one-year mark, waiting until it passes can make a real difference to both the tax on a swap and the size of your deduction.
Do wash-sale rules apply?
The wash-sale rule stops you claiming a loss on a stock or security if you buy the same or a substantially identical one within 30 days before or after the sale. Under current law it doesn’t apply to crypto. But in September 2026 the House Ways and Means Committee approved a bill, the Digital Asset Tax Certainty Act (H.R. 10357), that would extend it to most digital assets other than US-dollar stablecoins. As approved by the committee, it would cover sales made after 14 September 2026, before the bill becomes law. It had not passed Congress at the time of writing. If you realize a loss and plan to buy the same coin back within 30 days, ask a tax professional first.
Common questions
Will my exchange report the swap to the IRS?
If you swap on a US custodial exchange, yes. From 2025, brokers report gross proceeds of crypto sales and swaps on Form 1099-DA, and for coins bought from 2026 and held on the same platform they also report cost basis. Swaps in your own wallet or on a decentralized exchange usually aren’t reported to the IRS, but you still have to report them.
Is there a limit on how much I can deduct?
Yes. Gifts of long-held crypto to a public charity are generally limited to 30% of your adjusted gross income for the year, with any excess carried forward for up to five years. Cash gifts have a higher limit.
Does the new deduction for people who don’t itemize cover crypto?
No. From 2026, people who don’t itemize can deduct up to $1,000 ($2,000 for married couples filing jointly) of cash gifts only. Crypto is property, so you need to itemize to deduct it.