Tax on Gifting Crypto?
Whether it’s the season or you’re just feeling generous, gifting crypto is becoming commonplace - but crypto gift tax rules vary depending on where you live. For some, it’s a great way to optimize their tax position, while for others you might be stuck with a large tax bill in return. Learn about your country’s crypto gift tax rules.
Are crypto gifts taxable?
The short answer - sometimes. It depends on where you live.
Many countries view gifting crypto as a disposal of a capital asset, just like a sale. This makes crypto gifts subject to Capital Gains Tax. However, some countries - like Ireland - have a specific gift tax that applies instead.
On the other hand, some countries have a specific amount you can gift to friends and family tax free, while others allow tax free gifts to spouses and a select few countries don't tax gifted crypto at all!
Can crypto gifts reduce my tax bill?
Many investors use gift allowances to optimize their tax position. For example, when gifts are tax free to spouses and there is a personal capital gains tax allowance or a partner with lower income in the household - you can gift crypto to reduce your overall tax liability.
For others, where gifts are taxable, they may use this to create capital losses to offset capital gains to reduce their overall tax burden.
Let's dive into the specific rules for crypto gift tax in each country to see how crypto gifts are taxed.
Crypto gift tax US
It’s good news for US crypto investors when it comes to crypto gift tax.
The IRS says, "a taxable gift is any property transferred for less than adequate and full consideration."
In other words, the IRS considers a transaction a gift, provided you didn't receive anything of equal value in return.
If you're sending crypto as a gift, you'll have no tax obligation - provided the value of the cryptocurrency gift is less than $16,000 based on the fair market value (FMV) on the day you sent it. If the FMV is more than $17,000 (for 2023), you'll need to fill out IRS Form 709. Provided you haven't exceeded the lifetime gift tax exemption of $12.92m (for 2023), you won't need to pay tax on gifting crypto. If you have exceeded this amount, you may be liable for gift tax of between 18% to 40%.
Whoever you send the gift to won't have to report receiving the gift to the IRS, until the point they sell the gift. When the recipient sells, swaps, or spends their gifted crypto, this would be subject to Capital Gains Tax, as any other crypto disposal would be in the US.
When you gift crypto, the recipient can use an adjusted cost basis to figure out their capital gains or losses when they sell the asset - this is also known as a carryover basis. This is easier to understand with examples.
Example 1:
Erin buys 1 ETH for $2,000. She gifts 1 ETH to Paul. The FMV on the day she gifts it is $1,000. Paul later sells the 1 ETH for $900.
Because there is a capital loss at the time it was sent, Paul can't use the original cost basis of $2,000. Instead, he uses an adjusted cost basis based on the FMV on the day he received the gift, so $1,000.
$900 - $1,000 = -$100. Paul has a capital loss of $100.
Example 2:
Erin buys 1 ETH for $2,000 and gifts it to Paul. The FMV value on the day she gifts it is $1,000. Paul later sells the 1 ETH for $2,200.
There is a capital gain, so Paul would use Erin's original cost basis to calculate his gains or losses.
$2,200 - $2,000 = $200. Paul has a capital gain of $200.
Crypto Gift Tax UK
The HMRC has clear guidance on gifting crypto. If you give away coins or tokens to a person who isn't your spouse or civil partner, you'll need to pay Capital Gains Tax in the UK.
There are different rules for Capital Gains tax on gifts to your spouse. You don't have to pay Capital Gains Tax on assets you give or sell to your wife, husband or civil partner. Many investors take advantage of this rule to optimize their tax position.
Like in the US, your spouse may have to pay tax on any capital gains later on. However, because the UK has a personal CGT allowance of £12,300 a year, if their net capital gains are under this amount, they'd pay no Capital Gains Tax upon selling the asset and they do not need to report it to HMRC.
EXAMPLE
Warren buys 1 BTC for £10,000 and later gifts it to his husband Sam. The FMV on the day he gifts it is £20,000. This gift is to a spouse, so Warren pays no Capital Gains Tax.
A few months later, Sam sells the 1 BTC for £25,000. He didn't sell on the same day or within 30 days of receiving so he uses the Shared Pool Cost Basis method to figure out his gains, as he has multiple BTC. His average cost basis is £15,000.
£25,000 - £15,000 = £10,000. Sam made a capital gain of £10,000. This is within his personal CGT allowance of £12,300. He does not need to report this gain or pay Capital Gains Tax.
Crypto Gift Tax Australia
The ATO is clear that Australia views gifting an asset as a type of disposal, this means gifting crypto is subject to Capital Gains Tax in Australia.
However, while gifting crypto to your family and friends is subject to Capital Gains Tax, if you’re donating crypto to a deductible gift recipient (DGR), this would be tax deductible. But not all charities are DGRs, so make sure you check before donating if you want a tax write-off.
As well as the initial gift being subject to Capital Gains Tax, if the recipient subsequently sold, swapped, spent or re-gifted the gifted crypto, this would also be considered a disposal and subject to Capital Gains Tax.
EXAMPLE
Ben buys 1 ETH for $3,000. This is Ben’s cost basis. He gifts it to his friend Amar a few months later. The FMV of 1 ETH that day is $4,000.
$4,000 - $3,000 = $1000. Ben has a capital gain of $1,000, which is subject to Capital Gains Tax.
Amar sells 1 ETH for $4,500 a couple of months later. His cost basis is the FMV on the day he received the gift, so $4,000.
$4,500 - $4,000 = $500. Amar has a capital gain of $500, which is subject to Capital Gains Tax.
Crypto Gift Tax Canada
The CRA views cryptocurrency as a commodity, not a currency. Therefore, when you give a crypto as a gift in Canada, this is subject to Capital Gains Tax as it’s seen as a disposal of an asset.
The recipient of the gift uses the FMV of the asset the day they received it as their cost basis should they later wish to sell it. Only 50% of your capital gains are subject to tax in Canada.
EXAMPLE
Noah buys 1 ETH for $4,000. He later gifts it to Olly. The FMV for ETH that day is $4,200.
Noah’s cost basis is $4,000.
$4,200 - $4,000 = $200. Noah has a capital gain of $200, 50% of which is subject to Capital Gains Tax.
Olly sells his 1 ETH a few months later for $4,500. His cost basis is $4,200.
$4,500 - $4,200 = $300. Olly has a capital gain of $300, 50% of which is subject to Capital Gains Tax.
Crypto Gift Tax Germany
Considering how generous Germany's other crypto tax laws are, it should come as no surprise that their crypto gift tax laws are too.
Gifts to friends are tax free in Germany, up to a value of €20,000. Meanwhile, gifts to spouses are tax free up to €500,000! It's worth noting once you hit these limits, your gifts are no longer exempt from taxes. Gift tax exemption limits renew every 10 years.
Gifts over this value are taxable under Schenkungssteuer. This tax law has different tax rates depending on who the recipient is - a spouse, child, parent, sibling or friend. The tax rates vary from 7% up to 50%.
Crypto Gift Tax France
France is one of the best places to live if you’re feeling generous with your crypto. This is because in France, crypto is only taxable once it is converted into fiat currency. So as the gift giver, you’ll pay nothing in tax for gifting crypto and the recipient will pay nothing in tax upon receiving it.
When the recipient exchanges the received crypto for fiat currency, this would be subject to tax if they had more than €305 in total gains that tax year.
How to Calculate Crypto Gift Tax with Koinly
Koinly crypto tax software can help you calculate your crypto taxes, including any gifted crypto.
All you need to do is tag your tax-free gifts in Koinly and it will work its magic to exclude this transaction from your Capital Gains Tax calculations. If your country taxes gifts, don't use the gift tag - Koinly will calculate this as a regular Capital Gains Tax transaction. After this, simply download the correct tax report for your location and file your taxes with your local tax authority.
Summary
Gifting crypto is subject to Capital Gains Tax in many countries.
Some countries allow you to gift crypto tax free to spouses and friends, up to a certain limit.
A few countries don't tax gifted crypto at all.
When a recipient disposes of gifted crypto, this will be subject to Capital Gains Tax.
Many investors gift crypto to optimize their tax position.
