Crypto Gift Taxes in the US: Ultimate Guide for 2024!

Is there a tax for crypto gifts and donations? Can offering crypto gifts or donating crypto to a charity lead to taxes?

Do you have to pay taxes for your good actions? Or, can crypto gifts or donations lower your tax bill?

Let’s cover if giving a crypto gift to someone or donating cryptocurrencies to a charitable organization are taxable events, reporting requirements for crypto gifts, and more!

What are cryptocurrency gifts?

A cryptocurrency gift is when someone transfers some of their crypto holdings to someone else as a gift.

Crypto gifting occurs when you send crypto from your personal wallet to another wallet belonging to an acquaintance, friend, or family member as a gift.

Do I have to pay taxes on crypto gifts?

Crypto gifts are usually not taxable in the US for both the donor and the person receiving the gift. However, if you give someone over $17,000, you’d have more reporting requirements.

If that’s your case, you’d need to file a gift tax return since you have exceeded the annual gift tax exclusion amount. Please note that if you are the recipient of a crypto gift, you usually don’t need to report it regardless of the gift value unless the gift comes from a foreign donor.

How does tax on crypto gifts work?

Crypto gifts are generally not taxable for both donors and receivers of the gift, but there are exceptions. Let’s take a look at them.

Giving crypto as a gift

As a general rule, giving crypto to someone as a gift is not a taxable event in the US. However, if you surpass the annual gift tax exclusion amount of $17,000 in 2023, you’ll have additional reporting requirements. The exclusion amount may change each year as determined by the IRS.

Receiving crypto as a gift

Receiving crypto as a gift is not a taxable event in the US, regardless of the amount you receive as a gift. 

You don’t have to report that gift in your income tax return or form 8949. 

If you later sell the crypto you received as a gift, you’d need to know your cost basis in the crypto to calculate your gain or loss on the trade.

Your cost basis equals either the FMV of the gift at the time of your receipt or the donor’s adjusted basis in the crypto they gifted to you, depending on whether the FMV of the crypto at the time of gifting is higher or lower than the donor’s adjusted basis.

Let’s imagine that your dad gifted you some crypto. When he bought it, the FMV was $5K. After one year, he gave the crypto to you, but now the FMV is $10K. In this case, you will inherit your dad’s original basis because the FMV of the gift is higher than his cost basis.

Other than the cost basis, a gift recipient also usually inherits the donor’s date of acquisition for the gifted asset. Therefore, if you received a crypto gift from someone who bought the crypto more than a year ago, you could get a long-term capital gain tax treatment even if you sold the crypto the same day after you received it.

Selling a crypto gift

If you receive crypto as a gift and then later sell it, you’d have a taxable event, subject to capital gains taxes in the US.

Let’s look at an example.

John received $10K worth of Bitcoin in November 2022 as a gift. The donor’s cost basis in the Bitcoin was $8K.

In December 2023, that same Bitcoin was worth $13K, and John decided to sell it.

John will be taxed on a $5,000 gain ($13,000 – $8,000) at a long-term capital gains tax rate, ranging from 0% to 20%, depending on his other personal factors.

How do I prove that the crypto I received was a gift?

The best way is to have the donor write you a gift letter describing the gift, including the amount and name of the asset, their cost basis, and its date of acquisition. The letter should also make it clear that they are sending the asset to you as a gift.  

Is crypto donation a taxable event?

Crypto donations are not taxable events in the US, and you can even get a tax deduction if you donate crypto to a qualified charitable organization. Let’s look at the details.

Giving a crypto donation

If you give crypto as a donation to a charitable organization, you can claim an itemized tax deduction, lower your capital gains taxes, and effectively reduce your crypto taxes.

For crypto assets that you have owned for more than a year, you could deduct the FMV of the asset if it’s higher than your cost basis as a charitable contribution deduction, and unlike in a sale, you don’t need to report any capital gains for the difference between the FMV and your cost basis.

Therefore, if you want to donate an appreciated crypto asset, you should donate the crypto directly rather than selling it first and then donating the sales proceeds to avoid recognizing capital gains from the sale. 

Receiving a crypto donation

Receiving donations is usually not a taxable event for registered charitable organizations. They will still need to report the donation in their nonprofit organization tax return, but they don’t need to pay taxes on it. 

How to report gifts & donations on taxes?

Sending crypto gifts to other people does not need to be reported if you do not surpass the annual exclusion amount for each recipient. However, if you surpass the limit, you’d need to file a gift tax return using Form 709.

If you receive a crypto gift, you usually don’t need to report it regardless of the gift value unless you received it from a foreign donor. If that’s the case, you will need to fill out Form 3520 if the foreign gift you received exceeds a certain threshold.

If you donate crypto to charitable organizations and you want to claim a charitable contribution deduction, you’d need to report those donations on Form 8283 if the FMV of the donation exceeds $5,000.

You can automatically track all these donations and gifts with crypto tax software like CoinTracking and generate tax reports.

How to reduce crypto gift & donation taxes?

You can reduce your crypto taxes by donating crypto to charitable organizations and claiming an itemized tax deduction, but crypto gifts do not lower your crypto taxes. 

If you receive a crypto gift and want to sell those coins at a profit later, hold them for over 12 months to benefit from a long-term capital gains tax rate.

Your holding period will include the donor’s holding period, with chances that you do not need to hold the asset for more than 12 months to enjoy a long-term capital gain tax treatment.

There are other ways to reduce your crypto taxes:

• If you have losses, you can use them to offset your capital gains and deduct up to $3,000 from your ordinary income;
• Crypto tax loss harvesting;
• Use retirement accounts (e.g., IRA) to invest in crypto;
• Move to income-tax-free US states or crypto-friendly countries.

How to easily calculate taxes on crypto gifts

You can easily calculate the Fair Market Value (in USD) of any crypto you’ve gifted or have been gifted with a crypto tax software such as CoinTracking. 

If you import those gift transactions into a crypto tax software, you can easily track their FMV and know if you surpass the annual gift tax exclusion amount, creating reports to meet filing requirements.

Crypto gift taxes in other countries

Canada

If you give crypto to someone as a gift in Canada, you’d be taxed at the capital gains tax, as that is seen as a disposal of assets. The FMV of the crypto gift will be the cost basis for the person who receives the gift if they later sell it.

Learn more about crypto taxes in Canada.

Australia

In Australia, if you give crypto as a gift, that is seen as a disposal, and you would be taxed at the capital gains level. If you receive that crypto as a gift, you’re taxed when you dispose of it for a profit. Discover how Australia taxes crypto.

UK

The UK taxes crypto gifts to someone who is not your spouse/partner at the capital gains level. Learn more about crypto taxes in the UK.

Germany

Germany does not tax crypto gifts until a €20K limit (per year), while that threshold increases to €500K for spouses and €400k for your children. Discover more about crypto taxes in Germany.

France

Crypto gifts are not taxed in France, but if you later sell the gifts, you’d need to pay capital gains taxes on the profit (the FMV when you receive the coins is the cost basis).

Conclusion

Fortunately, you can give or donate cryptocurrencies in the US without paying extra taxes. 

However, if you send someone gift(s) more than the annual gift tax exclusion amount, you’d have to file a gift tax return. On the other hand, you can get a tax deduction if you donate cryptocurrencies to charitable organizations.

CoinTracking is your go-to solution to track all those gifts and donations and ensure you can accurately report that crypto to be eligible for possible tax breaks.

Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.