Crypto Gifts and Donations: US Rules for Giving Crypto

Two transactions get filed under the same heading and behave completely differently. Giving crypto to a person is a gift. Giving it to a qualified charity is a charitable contribution. The first is generally not an income tax event for either side; the second can produce a deduction. Confusing them is expensive in both directions.

Gifting to a person

Unlike the UK, where a gift is a disposal for CGT, a gift in the US is generally not a sale and does not trigger capital gain for the giver. What it does trigger, above certain amounts, is a gift tax reporting obligation. Form 709 is the gift tax return you may need if you gave away crypto above the annual exclusion. Confirm the current exclusion amount with the IRS, since it changes.

Reporting a gift is not the same as owing gift tax. Most gifts above the exclusion consume lifetime allowance rather than producing an immediate payment, but the return is still required.

What basis the recipient takes

This is the part that determines the eventual tax, and it is the part people almost never document.

A recipient of gifted property generally steps into the giver's basis and holding period for the purpose of computing gain, with a separate and less favourable rule where the property has fallen in value below the giver's basis at the time of the gift. The practical consequence is that gifting appreciated crypto does not wash out the gain, it transfers it.

Which means the record that matters most is the one nobody creates: what the giver paid, and when. Without it, the recipient may end up unable to substantiate any basis at all, and the whole proceeds figure becomes gain. If you gift crypto, hand over the acquisition records with it.

Donating to charity

Donating appreciated property to a qualified charity has a materially different profile from selling it and donating the cash, because the sale step is what realises the gain. Crypto is treated as property for this purpose, so it follows the non cash contribution rules rather than the cash ones.

The consequences of being non cash property are procedural and strict:

• Non cash contributions have tiered substantiation requirements that escalate with value, including a contemporaneous written acknowledgement from the charity and, above the relevant thresholds, a qualified appraisal.
• The idea that an exchange price is self evidently the value does not remove the appraisal requirement where it applies. This is the single most common error in crypto donation planning.
• The deduction may be limited by your adjusted gross income and by the type of organisation, with excess carried forward.

Because the amounts and the thresholds both change, and because the appraisal requirement is procedural rather than negotiable, this is one to run past a professional before the transfer rather than after.

What both have in common

You need to evidence the value at the moment of transfer. Record the date, time, units, the price source used, and the resulting dollar value, at the time. For a donation you also need the charity's acknowledgement, and for a gift you should pass on the giver's acquisition history.

What is not a gift

Moving crypto between wallets you control is not a gift and not a disposal, it is a transfer. Paying someone for goods or services in crypto is not a gift either, it is a disposal by you at market value and income to them. And selling crypto cheaply to a relative is a sale, with the shortfall potentially analysed as a gift, rather than a way around either regime.

Our US crypto tax guide covers the forms and rates, and cost basis covers the records a recipient will eventually need.

General information, not tax advice. Rules change and depend on your circumstances. Confirm the current position with the relevant tax authority or a qualified tax professional.