Is there a crypto gift tax?

The Internal Revenue Service has a variety of rules on pretty much everything involving money. Cryptocurrency falls into that. You can read more about how crypto is taxed here, but for now let’s zoom in to gifts involving crypto. The IRS’s rules regarding cryptocurrency gifts can be complicated, whether you’re the donor or the recipient.

How is a crypto gift taxed? (Giver)

Let’s say that you give your sibling a gift of a few cryptocurrencies. If the fair market value of those coins is less than $15,000 at the time that you give them, then you have nothing to worry about! The IRS does not consider this a taxable event. In fact, you don’t even need to report this gift on your tax return. It’s smooth sailing for you!

However, if you give someone crypto which is equal to or more than $15,000, we start running into issues. The IRS expects you to fill out a gift tax return. You must print out Form 709, fill it out by hand, and mail it before the April 15 tax deadline.

Note that this filing only applies if you give the cryptocurrency to a single individual or entity. If you split the gift into three $5,000 gifts to three different people or organizations, then your crypto gift is not taxed.

YokeTax professionals can help you get started on crypto gift strategies that can help you lower your taxes in the long run. Set up a consultation with a pro today.

What about charities?

If the cryptocurrency gift is given to a charity, how it is taxed changes slightly.

If the charity qualifies to receive deductible donations, you do not need to file a return on your crypto gift. This only applies so long as you transfer all interest in the given crypto to that charity. If you only gave the charity partial interest in your crypto gift, then you must file and report this to the IRS.

If the charity does not qualify to receive deductible donations, you must include your gift in your filing.

Another interesting thing about gifting to charities is that this will not trigger a capital gain or loss in the eyes of the IRS. In fact, if you have been holding onto your donated crypto for more than a year, you are eligible for a deduction! This deduction is equal to the fair market value of the crypto on the date of your donation. You still qualify for a deduction if you’ve held the donated crypto for less than a year, but the deduction will be lower.

No matter what you do, always remember that crypto donations should be reported on Schedule A, line 12 as part of your itemized deductions.

How is a crypto gift taxed? (Receiver)

The IRS does not consider receiving a crypto gift as a taxable event. You aren’t required to recognize your new crypto as income. If the value of the crypto exceeds the $15,000 limit, then it will be taxed on the part of the giver, not the receiver.

No matter how you choose to lower crypto taxes on your portfolio, it is best to connect with a tax professional to make sure that everything is done correctly. Let Yoke Tax handle the numbers while you reap the benefits.