Crypto Gift Tax Considerations

Due Team

Crypto Gift Tax Considerations

Gifting digital assets has moved from a niche experiment to a mainstream act of generosity. When the market is buzzing, it’s easy to send tokens as a holiday present or a birthday gift and call it a day. The IRS doesn’t see it that way. Because crypto is treated as property, not cash, your “simple” gift falls under U.S. tax law and is subject to specific rules, forms, and thresholds. A 2025-ready walkthrough of crypto gift tax rules, plus the planning moves that keep presents compliant and your return clean.

Crypto Gift Tax Rules in the U.S.

Under U.S. law, cryptocurrency gifts are treated much like gifts of stock. The donor generally doesn’t trigger income tax at the moment of giving, but tax rules still apply. For 2025, the annual exclusion is $19,000 per recipient. A married couple can contribute a combined $38,000 to the same recipient in a year without owing tax. If each spouse gives their own $19,000, no gift tax return (Form 709) is required. However, if one spouse gives the full $38,000 and the couple elects gift-splitting, both spouses must generally file Form 709 to make the election, even though no tax is due. The lifetime estate and tax exemption is $13.99 million in 2025.

When you do exceed the annual exclusion, you report with Form 709 (United States Gift (and Generation-Skipping Transfer) Tax Return). The IRS updated the 2024 instructions and page in January 2025, a reminder that mechanics and line references shift, don’t reuse old templates.

A December 2024 rule would have required digital-asset broker reporting on Form 1099-DA starting January 1, 2025. Still, on July 11, 2025, the rule was revoked under the Congressional Review Act and currently has no force or effect. Keep thorough basis and transaction records while the Treasury/IRS issues further guidance.

Charitable angle? If you give appreciated crypto directly to a qualified charity, it’s typically

deductible (subject to holding period and appraisal rules) and doesn’t count against your annual exclusion. Use Form 8283 for noncash donations over $500; larger donations may require a qualified appraisal. Check 2025 Pub. 526 and the 8283 instructions before filing.

Overlooked Detail: The exclusion works per recipient, per year and spans all properties. If you give a friend $12,000 in cash and $10,000 in BTC in 2025, you’ve crossed the $19,000 cap and should report the $3,000 excess on Form 709 (even though you’ll almost certainly owe no tax because of the lifetime exemption).

When Gifts Are Not Subject to U.S. Gift Tax

While the annual exclusion and lifetime exemption cover most presents, there are several exceptions to keep in mind:

Gift Tax Free Transfers Between Married Couples: Transfers between married spouses will not incur gift tax, and the transferor does not need to file Form 709.
Qualified Charitable Donations: By donating crypto to a qualified U.S. charity directly, you avoid gift tax, and as long as the owner of the crypto has held the asset for more than a year, the donor can deduct the fair market value (FMV) of the asset.
Tuition or Medical Expenses Paid Directly: You can directly pay someone’s medical bills or tuition to the provider, knowing that it is a gift tax exclusion.
Nominal Transfers Between Your Wallets: Transferring crypto between wallets under your control is not a gift, which means you do not trigger a tax.

State‑Level Nuances and Community Property Rules

In most of the country, you don’t have to worry about a separate state gift tax. The lone outlier for 2025 is Connecticut. It still has one, and its exemption mirrors the federal limit of $13.99 million. If you live there, the tax applies to anything you give away, no matter where in the world it is. If you live elsewhere but gift Connecticut real estate or tangible items located in the state, you can still get pulled into its rules. And even if you owe nothing, Connecticut wants the paperwork — a gift tax return is required for all taxable presents.

Under current law (Tax Law § 954(a)(3)), New York adds certain taxable gifts made within three years of death back into your estate only if you die before January 1, 2026. Gifts made in 2025 are included only if the donor dies in 2025 (or by December 31, 2025). Deaths in 2026 or later aren’t subject to the add-back.

Things get even more interesting in community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, most property acquired during marriage belongs equally to both spouses. The IRS sees it that way, too: a gift of community property is treated as half from you and half from your spouse. That means each of you is considered to have made a present and, depending on the value, each may need to file their own gift tax return.

Tax Implications When the Gift Recipient Sells the Gifted Crypto

Receiving a gifted token is not a taxable event. The recipient owes taxes only when they sell (or otherwise dispose of) the asset. At that point, capital gains rules determine the gain/loss and the rate (short-term vs long-term). The holding period and cost basis generally carry over from the gifter to the recipient.

Practical Example: You bought 1 ETH at $1,500, later gifted it when the FMV was $1,400. If your recipient sells for $1,200, the dual-basis rules limit the loss calculation; loss is measured from the value at receiving ($1,400 to $1,200), not from your original $1,500 basis. If they sell for $2,200, the gain uses your $1,500 basis ($700 gains). That’s why documented cost basis and a contemporaneous FMV snapshot matter.

If you cannot identify the donor’s basis, the IRS may assume it is zero, requiring tax to be paid on the proceeds in their entirety. To avoid any surprises, all donors should create a gift letter identifying the cryptocurrency, the donor’s acquisition date and cost basis, the date of the gift, and the FMV. Each party should maintain records and preferably attach a contemporaneous price snapshot from a reputable exchange.

How Cost Basis and Loss Limits Work

Think in two numbers: the donor’s adjusted cost basis and the FMV on the gift date. If FMV ≥ basis at giving, the recipient inherits the giver’s basis and holding period (classic carryover). If FMV < basis, the dual-basis regime applies: use donor basis for gains; use gift-date FMV for losses. These mechanics are straight from IRS basis guidance and reaffirmed in Pub. 551.

Losses realized on later sale can offset other capital gains and up to $3,000 of ordinary income each year, with carryforwards. Timing sales around your broader portfolio can therefore make a difference, but the rules only help if your records (dates, FMV, donor basis) are tight enough to withstand a document request.

Crypto Gifts From Businesses: Tax Treatment

If a company “gifts” tokens to an employee, influencer, or contractor, the IRS typically doesn’t treat that as a gift. It’s compensation (ordinary income) to the recipient, reportable on W-2 (employees) or 1099-NEC (non-employees) at the receipt value. Separately, the IRS’s digital-asset guidance and 1099-DA regime mean more activity will be visible, not less.

Generally speaking, promotional airdrops or rewards to customers are taxed as ordinary income to the user or recipient. So, companies should avoid calling their marketing program a gift. An airdrop recipient should also be issued a 1099-MISC if the airdrop payment exceeds the threshold. Accurate reporting reduces IRS penalties and demonstrates compliance.

Cross-Border Crypto Gifts: Tax Implications

Cross-border gifting introduces a second layer: information reporting and special transfer tax regimes.

Start with inbound gifts: U.S. persons who receive more than $100,000 in the aggregate from a nonresident alien or foreign estate in a calendar year must report on Form 3520. Penalties for failing to report can reach 5% per month up to 25% of the amount. Gifts from foreign corporations/partnerships have lower thresholds (the 2025 instructions and inflation-adjusted guidance govern the exact figure).

Outbound gifts (U.S. person gives to a non-U.S. person) still engage U.S. gift tax rules—the gifter files Form 709 when above the exclusion. Also consider foreign account reporting (e.g., FBAR/FATCA) if you control foreign wallets or accounts that cross the thresholds. The 2025 push to standardize digital-asset reporting only increases cross-border visibility.

Due’s infrastructure is well-suited for cross-border cryptocurrency transfers, which can include gifting scenarios where compliance and speed are equally important. The platform operates through a fully non-custodial wallet, secured with advanced biometrics, ensuring that users retain complete ownership of their assets. Transfers are near-instant, allowing recipients to receive stablecoins and, if desired, settle into their local fiat currency with minimal fees.

Country‑Specific Gift Tax (or Capital Gains) Regimes

Only a few countries have a gift tax treaty with the United States. The IRS identifies this type of tax provision with Denmark, France, Germany, Japan and the UK. Canada’s treaty applies to estate tax but not gift tax, meaning a cross-border gift may be taxed differently in Canada. Many countries, like the UK, do not have a separate tax but regard crypto gifts as capital gains disposals for the donor, while other countries, like Germany, have a gift tax regime with its own exemption amount. The majority of countries are non-reciprocal to the U.S. gift tax rules, and thus, a transfer which is tax-free in the U.S. could be taxable abroad (or vice versa). Always check local law.

Non‑Resident Alien Donors and Intangible Property

The IRC includes an exception specific to nonresident alien donors. IRC § 2501(a)(2) states that gifts of intangible property (e.g., stock or cryptocurrency) that a nonresident noncitizen gifts are not considered taxable by the U.S. If the property is real property or tangible personal property, then it is only taxable if it is located in the United States. If the gift exceeds $100,000, the recipient in the U.S. would have to report the gift on Form 3520. Gift rules for spousal gifts differ because gifts to a noncitizen spouse carry a much higher annual exclusion (e.g. $190,000 in 2025).

Documentation and AML Considerations

If you’re sending crypto as a gift across borders, don’t skip the paperwork just because it’s “digital.” You’ll thank yourself later. At a minimum, put together a short gift letter saying, in plain English, “I’m giving this asset to you, here’s what it is, here’s when, and here’s why.” Keep proof you own the wallets involved — screenshots, statements, whatever shows control of both the sending and receiving addresses.

Save the transaction ID, the block hash, and the exact time it cleared. Take a price snapshot from a trusted exchange so you can show the fair market value in U.S. dollars on the date it moved. If you talked about the gift in email, chat, or even text, save that too. It all counts when a tax authority comes knocking.

Gifts From Covered Expatriates Trigger a Special U.S. Tax

This is the trapdoor: covered expatriates (certain former U.S. citizens or long-term residents) create a separate 40% tax regime under IRC § 2801, paid by the recipient in the United States. Final regulations published January 14, 2025, confirm Form 708 as the return for covered gifts and bequests. Timing matters: various provisions apply starting January 1, 2025, or the Federal Register publication on January 14, 2025. If you’re advising a U.S. recipient of a gifted token from a covered expatriate, build the Model T of documentation and calendar return due dates: the tax can apply years after expatriation, and the onus is on the U.S. recipient.

Tax Planning Strategies for Crypto Gifting

Early planning matters more than perfect hindsight. If you know you’ll be giving tokens this year, structure the transfers with intent, not impulse.

One: Manage the annual exclusion. Schedule gifts to stay under $19,000 per recipient or use split gifting with a spouse to reach $38,000 without consuming the lifetime exemption. Build a calendar—December/January splits often solve last-mile planning problems.
Two: Mind basis before giving. If the asset has dropped below your basis, consider realizing the loss yourself first, then gifting the proceeds (or a different lot). Because the recipient’s ability to claim a loss is limited by gift-date FMV, donors who harvest losses themselves often create better tax outcomes. The IRS dual-basis rules are explicit—use them, don’t fight them.
Three: Charitable route. Gifting appreciated crypto directly to a qualified charity can eliminate capital gains exposure and generate an income tax deduction (subject to AGI limits and substantiation). For noncash donations over $500, file Form 8283; for larger amounts, expect appraisal requirements under Pub. 526/8283 instructions.
Four: Documentation discipline. Keep a gift letter with the token, value, date/time, tx hash, donor acquisition date and basis. With 1099-DA rolling out and audits relying on digital trails, your paper (and chain) trail is your best defence.

Use the Annual Exclusion to Your Advantage

The exclusion resets each year. If you’re moving sizable positions to family over time, map multi-year gifting across beneficiaries. For high-net-worth donors, coordinate exclusion gifts with other estate-planning vehicles; just remember 2025 is the final year before the currently scheduled exemption reversion in 2026 (barring legislative change), so tracking how much lifetime exemption you actually use is critical.

Use the Annual Exclusion to Your Advantage

Each January resets your annual gift exclusion, creating an opportunity to transfer significant wealth over time. By giving up to $19,000 per person each year, you can reduce your taxable estate without incurring gift tax or using your lifetime exemption. If you are married, coordinate gifts so that both spouses split them and effectively double the limit. A series of annual gifts can move a large quantity of crypto to your children or heirs while you still retain control over your finances. For high‑net‑worth donors, coupling annual presents with a grantor-retained annuity trust (GRAT) or family limited partnership may amplify tax savings. However, these advanced techniques require professional guidance and should account for crypto’s volatility.

Common Mistakes to Avoid When Gifting Crypto

A few missteps could turn a generous gesture into a compliance headache. Avoid the following pitfalls:

Missing Cost‑Basis Details: Without records of the donor’s purchase price and holding period, the IRS may assume a zero basis.
Using the Wrong Valuation Date: Always use the FMV on the transfer date, not the date you agreed to the gift.
Mixing Personal and Business Wallets: Transfers between personal and business accounts can be reclassified as income or compensation.
Skipping Required Forms: File Form 709 for gifts above the annual exclusion and Form 3520 for large foreign gifts or bequests. Failure to file can lead to steep penalties.
Ignoring Covered Expatriate Rules: Gifts from covered expatriates may trigger a 40% tax and require Form 708. Don’t assume regular gift rules apply.

Make Crypto Gifting Smart, Strategic, and IRS-Compliant

Done right, crypto gift tax planning lets you transfer value with precision, keep capital gains in check, and keep your return tidy. Done poorly, it invites notices and rework. No matter if you are supporting family, donating to charity or redistributing wealth through estate planning, it’s important to know the rules and keep detailed records.

Suppose you want infrastructure that matches the compliance bar. In that case, Due is positioned for cross-border reality: fully non-custodial wallets, modern authentication, and regulated footprints alongside multi-rail payments that settle to local fiat.