Important points:
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Bitcoin gifts are not immediately taxed. Because the IRS treats cryptocurrencies as property, the recipient typically does not owe income taxes on the gift.
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Stay within the 2025 exclusion limits. You can make gifts of up to $19,000 per person, or $38,000 if split between spouses, without invoking Form 709.
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The recipient inherits the donor’s cost base. Future taxes are determined by the donor’s original purchase price, not the value of the cryptocurrency at the time of the gift.
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Keep detailed records to avoid problems with the IRS. Make your gift audit-proof by documenting fair market value, transaction date, and wallet details.
Bitcoin has become a popular gift for birthdays, holidays, or simply to share your enthusiasm for cryptocurrencies. Under U.S. tax law, gifts of Bitcoin (BTC) are not immediately taxable. The recipient has no income tax liability, and the donor generally has no gift tax liability if the value of the gift is within the annual exemption limit.
The Internal Revenue Service (IRS) treats digital assets as property rather than currency. This means that Bitcoin gifts fall under the same framework as stocks and real estate. These must be evaluated at the time of transfer according to real estate regulations and may need to be reported on Form 709 if the annual exclusion limit is exceeded.
This means you can gift Bitcoin without incurring any immediate tax liability. However, poor documentation or misunderstanding of basic rules can lead to problems later on.
What counts as a gift?
A gift of cryptocurrency must be a true transfer of ownership. Giving up control doesn’t get you anything in return. The 2025 annual exclusion allows up to $19,000 per beneficiary, or $38,000 for spouses, when using gift division without filing Form 709. Exceeding this threshold does not automatically result in a tax liability, but a form must be submitted.
Gifts between spouses of U.S. citizens are unlimited. For noncitizen spouses, the limit in 2025 is approximately $190,000. Transfers to non-residents or certain trusts may require additional requirements.
Not all transfers qualify as gifts under IRS rules. Only transfers made out of genuine generosity, without expectation of repayment or service, qualify as gifts.
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If you pay someone’s tuition or medical expenses directly, you are exempt from gift taxes.
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Transferring cryptocurrencies between your own wallets does not count as a gift.
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Transfers labeled as “gifts” that are actually payments for services are treated as income rather than generosity.
Once Form 709 is initiated
Form 709, U.S. Gifts (and Generation-Skip Transfers) Tax Return, is how the IRS tracks gifts that exceed the annual deduction limit. Most people don’t have to pay gift taxes, but some transfers still require filing.
You must file Form 709 if:
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Gifts to one person exceed the annual exclusion of $19,000 in 2025.
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If you make a gift with the expectation of future interest, the recipient cannot use or benefit from the asset immediately.
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You and your spouse choose to split the gift to double the deduction. This requires both spouses to file Form 709.
There is no need to submit in the following cases:
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All gifts fall within the annual exclusion and are subject to transfer at current interest.
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Gifts to the spouse of a U.S. citizen or to a qualified charity are completely excluded from filing as long as they transfer full ownership and control.
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All gifts will be sent to an eligible charity and all ownership will be transferred to you.
Did you know? Form 709 must be filed by April 15 of the year following the gift. You’ll need to file a separate form each year, but filing doesn’t necessarily mean your taxes will be paid. The 2025 lifetime exemption amount of $13.99 million typically covers most reportable gifts.
In fact, if you keep your cryptocurrency gifts below the annual limit and document the fair market value on the date of transfer, you’re likely to avoid filing altogether.
The trap of “double standards” for standards and recipients
If you receive Bitcoin as a gift, you won’t be taxed immediately, but future capital gains taxes will depend on the basis you inherit from the donor and your holding period.
Carryover basis
It typically inherits the donor’s original cost basis and holding period. If they bought Bitcoin for $5,000 and gave it away when it was worth $20,000, their basis would be $5,000. If you sell it later, you will be liable to pay capital gains tax on the difference between the sale price and its basis.
dual base rules
If the market value of the gift is lower than the donor’s basis at the time of the transfer, two different standards apply:
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Use the donor’s original base to get the benefit.
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For losses, we use the fair market value (FMV) at the time of the gift.
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If you sell between these two values, no gain or loss will be recognized.
Because early adopters of Bitcoin often have a very low cost base, those who receive high-value coins may face large tax obligations in the future. Conversely, a gift of Bitcoin that is worth less than the donor’s basis limits the potential loss deduction. If the donor pays gift taxes, a portion of that payment may increase the recipient’s basis.
Obtain the donor’s purchase date, cost basis, fair market value on the gift date, and whether gift taxes were paid before the sale. These details will determine whether your next Bitcoin sale will be a taxable gain, a deductible loss, or no profit or loss.
Cryptocurrency-specific pitfalls to avoid
While most cryptocurrency gifts follow standard property rules, digital assets pose additional risks that may trigger an audit or be non-deductible.
1. Turn gifts into sales
If you sell or exchange your cryptocurrency before transferring it, the transaction will count as a taxable disposition and not a gift. To be considered a true gift, you must transfer the asset directly, receive nothing in return, and permanently relinquish control.
2. Poor ratings or missing records
Be sure to document the fair market value (FMV) on the date of transfer, as well as the original cost basis, purchase date, and transaction ID. Without proper records, the IRS could challenge the reported amounts and the recipient’s subsequent profit and loss calculations.
3. Gifts that really turn into income
If cryptocurrency is given in exchange for services to an employee, contractor, or influencer, it counts as compensation, not a gift. This results in taxable income for the recipient and may subject the sender to payroll or self-employment taxes.
4. Transnational issues and non-national issues
International gifts and transfers involving foreign wallets may require the filing of Form 3520 and other disclosures. Unlike the unlimited exclusion for spouses of U.S. citizens, gifts to spouses of non-U.S. citizens will be limited to approximately $190,000 in 2025.
If you ignore one of these rules, your generous act can quickly become taxable.
Simple steps to avoid tax troubles
Gifting or donating cryptocurrency in 2025 will be easy if you follow a few important steps.
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Stay within limits: Keep the total gift amount to each recipient under $19,000 ($38,000 if split with your spouse). If it exceeds that amount, please file Form 709. You probably won’t have to pay taxes unless you exceed the lifetime exemption amount.
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Know what you are trying to convey: Recipients inherit your cost basis and retention period. Future tax bills are determined by the original purchase price, not the gift date value.
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Record everything. Please record the transfer date, fair market value, original cost basis and acquisition date, and wallet or transaction ID. Proper documentation will protect both parties if the IRS requests verification.
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Gift, do not sell: If you sell or exchange your cryptocurrency before gifting it, the transfer will be taxable. Transfer the assets directly instead.
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For charity: Donations over $5,000 require a qualifying evaluation as well as a screenshot of the exchange. Please check that the charity can accept cryptocurrencies before sending.
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See gifts across borders: Foreign recipients and non-national spouses are subject to relaxed exclusions and additional reporting requirements.
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Please seek professional advice for large or complex transfers. Large gifts, multi-signature wallets, and trusts can pose unique compliance issues.
Before gifting Bitcoin
Most Bitcoin gifts fall safely within IRS limits and do not result in immediate taxes. The risk usually arises after the recipient sells. The donor’s basis is inherited, so any gain or loss depends on its original value, not its market value at the time of the gift.
When handled properly, gifting Bitcoin is an easy way to share crypto wealth without tax complications. Keep detailed records, respect standards, and make sure the transfer qualifies as a true gift. Your generosity should not result in a surprise tax bill, and if you take the right steps, that won’t happen.