‘Tis the Season To Gift Crypto: Taxes and More Variables You Should Consider Before You Commit
‘Tis the season for crypto gifting, especially for those who are looking for a last-minute gift or are having trouble finding the perfect holiday present due to supply chain disruptions, lack of ideas or time.
A recent BlockFi survey showed that one in 10 respondents plan to gift crypto for the 2021 “HODLday.” Bitcoin reigns supreme as the crypto of choice for gifting and receiving at 75%. Meanwhile, Dogecoin and Ethereum coming in as second and third, respectively, the survey noted.
Several trading platforms make it very easy to buy and give cryptos. Coinbase, for example, underscores on its website that a crypto gift has the potential to increase in value over time, noting, however, that “it also has the potential to decrease in value,” and that it’s also educational: “Help friends and family learn crypto. With their gift, they can begin trading, HODLing, and using crypto,” Coinbase promoted.
Users can send, sign and personalize gifts from the Coinbase app, by selecting a recipient’s email (who doesn’t need to have a Coinbase account), picking a crypto (Coinbase said users won’t be charged any fees to send gift) and finally, picking a digital card featuring a piece of art from an up-and-coming artist.
Robinhood also launched its Crypto Gifts feature on Dec. 22, which enabled users to customize and send a crypto gift from the Robinhood app. The new feature allows gifting one of 7 cryptos with a unique design and personal message, according to a blog post. In addition, crypto gifts are 0% commission.
The process is also simple, as users can send as little as $1 worth of crypto directly to the recipient by sharing a link via email or text.
“Once a gift is sent, the recipient has 14 days to accept their new crypto gift. If they don’t, you won’t be charged (but you’ll still get bragging rights that you gave out crypto for the holidays.) If the giftee is a Robinhood customer, they will simply be redirected to the app to claim the gift. If they are not, they can sign up for Robinhood and then claim it,” according to the blog post.
However, while advantages to gifting cryptos are legion, gift givers should take into consideration several aspects, chief among them potential tax implications.
Time explained that as long as you’re giving less than $15,000 worth of crypto, it falls under the 2021 gift tax allowance. That means you won’t have to worry about any tax implications that come with the gift.
“If you give me crypto that is worth $30,000, then the difference between 15,000 and 30,000 is taxable as a gift, and is taxable to you as the person who’s giving it,” Chris Chen, a financial advisor with Insight Financial Strategists, told Time.
In addition, recipients may have to pay taxes on their crypto in the future as the IRS treats virtual cryptocurrencies like “property” for tax purposes, similar to other assets like stocks or gold. “It depends on the crypto’s capital gains or losses when the gift recipient sells or transfers it — basically, how much value their holdings gained or lost in a given period,” according to Time.
And of course, another potential downside is the giftee’s lack of interest or knowledge in cryptos.
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