Can I give cryptocurrency as a gift?
Yes, cryptocurrency can generally be easily gifted to another person. If the recipient already has a compatible cryptocurrency wallet, then you can simply transfer the cryptocurrency to the recipient’s existing wallet. If the recipient does not already have one, you may help them set up a wallet before sending the gift.
How do I give cryptocurrency to someone who is new to it?
If you are gifting cryptocurrency to someone who has never owned it before, you may want to help them open an account with a reputable U.S.-based digital asset platform. These platforms are typically user-friendly and operate much like a stock trading platform.
Cryptocurrency can make an excellent gift because it can be sent to anyone in the world. Gifting cryptocurrency is easy, but you should remember that transactions cannot be reversed or changed. Before you send a gift, make sure it is going to the correct wallet. You may also want to make the recipient aware of the risks of transferring cryptocurrency and the importance of securely storing their wallet information and passcodes.
Do I have to pay taxes on gifted cryptocurrency?
Whether or not you are required to pay taxes on gifted cryptocurrency depends on the total value of the gift. The IRS allows an annual gift tax exclusion up to a certain dollar amount per recipient, and a lifetime gift and estate tax exemption that applies to larger gifts. These limits are adjusted periodically for inflation.
To confirm the current exclusion and exemption amounts, you can refer to the IRS Gift Tax page. In most cases, cryptocurrency gifts will not be taxable unless you are transferring assets worth many millions of dollars.
A recipient is not taxed when they receive a gift of cryptocurrency. However, when the recipient later sells or otherwise disposes of the cryptocurrency, that transaction may be taxable. The recipient’s cost basis in the cryptocurrency is generally the same as the giver’s cost basis, so it’s helpful to provide documentation of your original purchase information when you make the gift.
Do I need to report cryptocurrency on my taxes?
Gifts of cryptocurrency are generally not reported on your income tax return. However, depending on the value of the gift, you may need to file IRS Form 709 (United States Gift Tax Return) to document the transfer.
You are typically required to file this form only if the value of the cryptocurrency gifted to a single recipient exceeds the annual gift tax exclusion limit. Filing the form does not necessarily mean you will owe taxes — it simply allows you to apply your lifetime gift and estate tax exemption to the gift.
Although gifting itself is not taxable, you are required to report cryptocurrency transactions — such as sales or exchanges — on your tax return. If you have questions regarding when you need to report the sale or exchange of cryptocurrency or if you want to learn more about the legal issues around cryptocurrency,reach out to a Legal Pro for affordable legal information.
Please note: This page offers general legal information, not but not legal advice tailored for your specific legal situation. Rocket Lawyer Incorporated isn't a law firm or a substitute for one. For further information on this topic, you can Ask a Legal Pro.
