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Did you forget to buy your loved one something special for the holiday season? Perhaps you didn’t forget at all, instead falling victim to the lengthy supply chain disruptions that seemed to plague this particular season. It’s easy to blame the lack of gift on the pandemic, as well as the overall increase in demand, but it would have been nice to have been punctual regardless of the reasoning.
The good news here is that it’s never too late to give a gift—especially when the gift you’re giving is crypto!
As a matter of fact, crypto has become quite popular as a gift option. BlockFi recently conducted a survey that showed that for every 10 respondents, 1 of them planned to give the virtual gift of cryptocurrency.
You can read more about BlockFi’s Happy HODLdays survey here.
According to the survey, Bitcoin is still on top with more than 75% of respondents indicating that they plan on gifting Bitcoin over other cryptocurrencies. The original Meme Coin—Dogecoin (DOGE)—came in second place. And while Ethereum (ETH) is the second most popular digital token worldwide, it came in third place amongst the survey respondents
As with any gift, cryptocurrency is fairly easy to give as a gift as long as you have a pretty solid grasp on the concept personally. In fact, many exchanges have started encouraging the idea of cryptocurrency as a gift. One such exchange—Coinbase—has created an entire page solely for highlighting this new concept. In fact, Coinbase will even deliver the gifted cryptocurrency (via email) as a digital card highlighted with a beautiful piece of crypto-related art inspired by the newest craze in blockchain technology—non-fungible tokens or as they’re better known, NFTs.
Coinbase isn’t the only exchange jumping in on the gift-giving action. The popular investing app, Robinhood, has also joined in by launching their new Crypto Gifts feature. With Crypto Gifts, Robinhood users can send any dollar amount (must be at least $1) worth of Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), Litecoin (LTC), Bitcoin Cash (BCH), Ethereum Classic (ETC), or Bitcoin SV (BSV). After choosing a specific cryptocurrency to send, users will then choose a digital card to essentially present the gift. At the time of this writing there were 9 card designs to choose from. From there, the gift is sent to the recipient via a special link.
At this point, the popularity of giving crypto as a gift has grown so much that it would not be surprising to find that every exchange (app or otherwise) has created an entire section devoted solely to gift-giving.
While gifts are supposed to be fun, joyous, and sentimental, gifting crypto will potentially bring about something that, quite simply put, isn’t much fun at all—taxes! Unfortunately, what was meant to be a decentralized monetary system has quickly gained a few aspects that contradict the term decentralized.
Taxes are one of those aspects!
Lucky for us, we are a highly advanced civilization, ultimately sparing us from having to read—and more importantly, understand—the tax code. There is a widely publicized myth that the U.S. tax code is 70,000 pages long. Granted, the tax code is a long and meticulous read, and while the text is amended quite often, the actual tax code is right around 2,600 words.
But I digress…
Believe it or not, the tax implications surrounding crypto gifts are actually quite simple to understand. The IRS does not view the receiving of a crypto gift as a taxable event. Therefore, recipients are not subject to any sort of taxation.
Contrary to this, the giver of a crypto gift is required to pay taxes, but only if the crypto given amounts to $15,000 or more. In such an instance, the giver is required to fill out a Gift Tax Return (IRS Form 709). However, since most crypto gifts are typically under that amount, the giver is usually not required to report the event on their tax return.
Thankfully we have the ability to file our tax returns online, and while there are paid programs that are chock full of features, most of us are happy with the free online tax filing software that is widely available. It is those programs that are constantly being updated with the latest amendments to the tax code. For instance, a reputable tax program will ask you via prompts if you have given a crypto gift worth more than $15,000. If you select yes, then the program should automatically populate IRS Form 709 with your information.
Of course, if you like to do things in a more antiquated fashion, there is always the option of filing your tax return manually via old-fashioned paper forms.
It is also important to note that while the recipient of a crypto gift is not required to report them on their tax return, they will have to pay taxes should they decide to sell the crypto in the future. In that situation, the sale will result in either a capital gain or a capital loss which should be reported accordingly.
While yes, taxes can be intimidating, please do not let that steer you away from cryptocurrency. Whether you’re investing in crypto personally or giving it as a gift, cryptocurrency has made an explosive debut in our day-to-day lives and is not going away any time soon. It is poised to completely revolutionize how money changes hands and is already being accepted as legal tender in a lot of places. By giving it as a gift, you are introducing someone to an exciting—and potentially lucrative—new world of investing.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.