Bitcoin Donations: Timing is Everything for German Taxpayers
Donating bitcoin to a charitable organisation can be tax-deductible in Germany. The amount of the deduction, however, depends on whether the one-year holding period has elapsed since acquisition.
If the holding period has elapsed, the donation is treated as a sale and the deductible amount is determined by the fair market value of the bitcoin at the time of transfer. This can result in a significant difference in the amount of the deduction, with a case study showing a 60,000 euro difference on an identical donation.
On the other hand, if the holding period has not elapsed, the deductible amount is capped at the carried-forward acquisition cost, meaning that only the original purchase price can be deducted. This means that selling and then donating cash may trigger tax, as it involves two separate operations: a sale and a cash donation.
The recipient of the donation must also be recognised as charitable to qualify for the deduction. A donation receipt on the official template is required for donations above 300 euros, while a simplified proof suffices for smaller donations.