Bitcoin Donations in Germany: Timing is Everything for Tax Deductions

A tax-deductible donation of Bitcoin to a charitable organisation in Germany is considered a donation in kind, and the donation itself does not produce any taxable gain. According to the German Income Tax Act, the size of the deduction turns solely on whether a sale of the Bitcoin would have been taxable on the day of the transfer.

Section 10b paragraph 3 of the law states that if the one-year holding period has elapsed, the amount of the transfer is determined by the fair market value, which is the price on the day of the donation. However, if the holding period is still running, the carried-forward acquisition cost may not be exceeded, and the increase in value is left out of the deduction.

A worked example illustrates the difference: if a person donates Bitcoin bought for 20,000 euros and now worth 80,000 euros, the deduction is 80,000 euros if the one-year period has elapsed, but only 20,000 euros if it has not. This means that a six-month delay in donating can result in a difference of 60,000 euros in special expenses.

The article also notes that selling and then donating the cash can trigger tax, as it involves a sale and a cash donation. In contrast, a direct donation in kind is generally the cleaner route for tax, even if the deduction covers only the acquisition cost.