Key Takeaways

• Gifts under $19,000 in crypto: No tax implications for gifter

• Gifts above $19,000: Gifter must report gift to the IRS, using Form 709

• Gifts above $19,000 count toward to a lifetime gift exemption of $13.61 million (as of 2025)

Introduction

Crypto has become an increasingly popular gift option in recent years. Whether you're considering gifting some Bitcoin to a family member or receiving Ethereum from a friend, it's important to understand the tax implications. This blog will walk you through everything you need to know about crypto gift tax in 2025.

What is Cryptocurrency Gifting?

Crypto gifting involves transferring ownership of digital assets like Bitcoin, Ethereum, or other cryptocurrencies to another person without expecting anything in return. This can happen for various reasons, such as:

• Presents for birthdays, holidays, etc.

• Helping a friend or family member get started with crypto

• Supporting a cause or individual

• Estate planning and wealth transfer

While gifting crypto might seem straightforward, the tax implications can be complex and vary depending on your location and the specifics of the gift.

General Tax Principles for Crypto Gifts

When it comes to crypto gifts, there are two sides to consider: the giver and the recipient. In most cases:

1. The act of giving a crypto gift is not usually a taxable event for the recipient.

2. The giver may have tax obligations, depending on the value of the gift and local laws.

3. The recipient may owe taxes when they eventually sell or dispose of the gifted crypto.

It's important to keep detailed records of any crypto gifts, including the date of the gift, the fair market value at the time of gifting, and the original cost basis (if known).

Crypto Gift Tax Rules in the United States

In the United States, the IRS has specific rules for cryptocurrency gifts:

Annual Gift Tax Exclusion

For 2025, you can gift up to $19,000 worth of crypto per recipient without triggering gift tax consequences. This is known as the annual gift tax exclusion.

Reporting Requirements

If you gift more than $19,000 worth of crypto to a single recipient:

• You must file IRS Form 709 (United States Gift and Generation-Skipping Transfer Tax Return).

• This doesn't necessarily mean you'll owe gift tax, as it counts towards your lifetime gift tax exemption of $13.61 million (as of 2025).

Tax Implications for the Giver

• Gifting crypto is not a taxable event for the giver.

• You don't realize capital gains or losses when you gift crypto.

• However, you may need to file Form 709 for gifts exceeding the annual exclusion.

Tax Implications for the Recipient

• Receiving a crypto gift is not a taxable event.

• The recipient's cost basis depends on whether the crypto has appreciated or depreciated since the original purchase:

  • If the crypto has appreciated: The recipient's cost basis is the same as the giver's original cost basis.

  • If the crypto has depreciated: The recipient's cost basis is the lower of the giver's cost basis or the fair market value at the time of the gift.

• The recipient will owe capital gains tax when they eventually sell or dispose of the gifted crypto.

Crypto Gift Tax in Other Countries

Tax laws for crypto gifts vary significantly around the world. Here's a brief overview of some major countries:

United Kingdom

• Gifting crypto is considered a disposal and subject to Capital Gains Tax, except for gifts to spouses or civil partners.

• The recipient doesn't pay tax upon receiving the gift but may owe Capital Gains Tax when they sell or dispose of the crypto.

Canada

• Gifting crypto is treated as a disposition at fair market value and subject to Capital Gains Tax.

• The recipient's cost basis is the fair market value on the day they received the gift.

Australia

• Gifting crypto is considered a Capital Gains Tax event for the giver.

• Donations to deductible gift recipients (DGRs) may be tax-deductible.

France

• Gifting crypto is not taxable for either the giver or the recipient.

• Tax is only applied when the recipient converts the crypto to fiat currency.

How to Properly Document Crypto Gifts

Proper documentation is crucial for tax compliance. When gifting crypto, create a gift letter that includes:

1. Names of the donor and recipient

2. Date of the gift

3. Description of the gifted cryptocurrency (type and amount)

4. Fair market value at the time of the gift

5. The donor's original acquisition date and cost basis

6. A statement confirming it's a gift with no expectation of repayment

Keep this letter and any related transaction records for your own record keeping.

Tax Optimization Strategies with Crypto Gifts

Gifting crypto can be a smart tax strategy in some cases:

1. Use the annual gift tax exclusion: Gift up to the annual limit to multiple recipients to transfer wealth tax-free.

2. Gift to a spouse: In countries like the US and UK, spousal gifts are often tax-free and can help balance capital gains between partners.

3. Donate to charity: In many countries, donating crypto to registered charities can provide tax deductions.

4. Gift depreciated assets: In some cases, gifting crypto that has decreased in value can create a tax loss for the recipient to use in the future.

Always consult with a tax professional before implementing any tax strategy.

Crypto Donations to Charities

Donating cryptocurrency to qualified charities can offer significant tax benefits:

• In the US, donations to 501(c)(3) organizations are tax-deductible.

• If you've held the crypto for more than a year, you can deduct the full fair market value.

• For crypto held less than a year, you can deduct the lesser of the cost basis or fair market value.

• You avoid paying capital gains tax on the appreciated value.

Ensure you get a receipt for any crypto donations, especially for amounts over $250.

Common Mistakes to Avoid

When dealing with crypto gifts, be aware of these common pitfalls:

1. Misunderstanding cost basis: Ensure you understand how the cost basis is determined for gifted crypto.

2. Failing to keep records: Maintain detailed documentation of all crypto gifts and transactions.

3. Ignoring reporting requirements: File necessary forms even if you don't owe gift tax.

4. Assuming all countries treat crypto gifts the same: Tax laws vary significantly between jurisdictions.

5. Overlooking the potential for future tax liability: Remember that the recipient may owe taxes when they eventually sell the gifted crypto.

Tools and Resources for Crypto Gift Tax Compliance

Managing crypto gift taxes can be complex. Consider using:

1. Crypto tax software: Many crypto tax platforms can help track gifts and calculate tax liabilities.

2. Professional help: For complex situations, consult with a tax professional experienced in cryptocurrency.

3. IRS resources: Refer to IRS Publication 551 for more information on the basis of assets, including gifted property.

Conclusion

Understanding the tax implications of cryptocurrency gifts is important for both givers and recipients. While the rules can be complex and vary by country, proper documentation and awareness of local laws can help ensure compliance and potentially optimize your tax situation. Always stay informed about changes in tax regulations and consider consulting with a tax professional for personalized advice.

About Arch

Arch is building a next-gen wealth management platform for individuals holding alternative assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services, powered by BitGo.

The information provided here is for educational purposes only and should not be construed as financial or legal advice. Tax laws and regulations can vary, and the tax implications of cryptocurrency transactions may be complex. It is highly recommended that you consult with a qualified tax lawyer and/or accountant to assess your specific situation and ensure compliance with applicable laws and regulations.