Receiving cryptocurrency as a gift can seem like a gray area when it comes to taxes. With digital assets coming into the mainstream, many people find themselves in possession of crypto that was freely given to them by a friend or family member. This raises important questions around how gifted crypto is treated for tax purposes.
Fortunately, the IRS has provided guidance on this topic. In most cases, receiving cryptocurrency as a bona fide gift is not itself a taxable event. You do not owe income tax merely for acquiring crypto through a genuine gift. The giver is also not subject to the gift tax in most situations.
However, once you receive gifted cryptocurrency, you inherit the giver’s cost basis. This means when you eventually sell or exchange the crypto, capital gains taxes will apply based on the difference between the sale price and the original purchase price paid by the gift giver. You are responsible for tracking this cost basis in order to calculate taxes owed.
An exception applies when the gift giver exceeds the annual federal gift tax exclusion amount, which is $16,000. Above this limit, the giver must file a gift tax return. But even then, you as the recipient do not owe gift tax – the giver would be responsible for paying the tax.
In summary, receiving cryptocurrency as a true gift does not generate a tax bill. You are not required to report or pay taxes on the gifted assets. However, when you dispose of the crypto in the future, you will likely owe capital gains based on the cost basis inherited from the original purchaser.
