How to Give Cryptocurrency as a Gift

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There are several ways you can send someone cryptocurrency as a gift. But you'll want to consider what's going to be easiest for you and the recipient, and whether they'd prefer to create an account on a popular financial app or manage the crypto on their own.

Choose Which Cryptocurrency You Want to Give

While Bitcoin is the most well-known cryptocurrency, it's one of many. Other cryptocurrencies (also called altcoins) include Litecoin, Dogecoin, XRP and Ethereum. Before sending a cryptocurrency as a gift, figure out which coin you want to send because some platforms that offer crypto gifting only support certain cryptocurrencies.

You may be able to easily send Bitcoin, and several platforms support other altcoins. But gifting a brand-new or lesser-known altcoin might require you to be more familiar with the crypto space and have a crypto wallet first.

Decide How You Want to Send the Cryptocurrency

The simplest method is to use a gifting option on a popular cryptocurrency exchange, investment app or peer-to-peer payment app. Alternatively, you can gift crypto directly from your crypto wallet to theirs or create a wallet for them and load it with funds.

Use an Exchange or Payment App

Three big platforms that let you gift cryptos are Cash App, Coinbase and Robinhood. Each has different requirements and limitations:

  • Coinbase: Using your Coinbase account, you can send any of the 150-plus supported coins. You'll need the recipient's email address to send the gift, and you can include one of the available greeting cards and a personalized note.
  • Cash App: You can use the Cash App to send Bitcoin to someone's $Cashtag, phone number or email address. There may be a minimum amount of $1 or 0.00001 Bitcoin.
  • Robinhood: You can gift one of the seven supported cryptos if you have an approved Robinhood Crypto account that's in good standing and has a linked bank account.

You may also find other companies offering crypto gift cards as well. However, it may be best to avoid companies that aren't well-known and could potentially be a scam.

Use a Crypto Wallet

Rather than using a third party to manage the transfer, you may be able to send crypto directly to someone's existing crypto wallet. To do so, you'll need to know their address and make sure the tokens you're sending are part of the same blockchain.

Asking these details could ruin the surprise, so an alternative could be to create a new software wallet or buy them a hardware wallet. You can then load the cryptos directly onto the wallet and give the recipient the recovery phrase. They'll need to trust you didn't keep a copy of the phrase, or they could transfer the crypto to a different wallet they control.

If all that sounds like gibberish, you may want to stick with using one of the apps. Creating and managing crypto wallets doesn't require a lot of technical expertise. But there's less room for error, and losing the info or sending the crypto to the wrong address could mean it's lost forever.

Help the Recipient Claim and Store the Cryptocurrency

If you're gifting crypto with an app, the recipient will have to set up an account on the platform and may need to verify their identity before they can claim the gift.

It can be a relatively simple process, but you may want to also gift them some of your time and show them around the app. The platform may return the gift to you if the recipient doesn't claim it within 14 to 30 days.

If you're gifting a wallet that's loaded with funds, make sure you share how important it is to keep the recovery phrase safe and private. Anyone who has that phrase can access and control the funds in the wallet.

How Are Cryptocurrency Gifts Taxed?

Giving a gift doesn't generally result in a taxable event for either person. How you gift the crypto could impact the recipient's taxes later, though.

Tax Implications of Sending a Crypto Gift

While gifts can be taxable, taxpayers are subject to an annual gift tax exclusion and a lifetime basic exclusion amount. Both exclusions are adjusted for inflation, and they're high enough that most people don't pay taxes for sending gifts.

In 2022, the annual gift exclusion is $16,000 per person you're sending gifts to. This means you can gift up to $16,000 in cash, crypto, stocks or other assets without having to do anything extra.

If you give more than $16,000 in 2022, you'll need to report the excess amount on your tax return, and it will count against your lifetime basic exclusion. However, the lifetime exclusion amount is about $12 million as of 2022, and you still won't pay gift taxes unless you use all of it.

Tax Implications of Receiving a Crypto Gift

The tax implications may be a little trickier for the recipient, but they're similar to receiving stocks and other types of investments.

There's no immediate tax implication for accepting the crypto. But if the person makes money on the crypto, they may need to include those gains in their taxable income for the year. Selling, swapping and spending the crypto can all trigger a taxable event based on the crypto's price at that time compared with its cost basis—which is where things get tricky.

With some of the apps, you're giving cash that gets converted into crypto when the person accepts the gift. As a result, their cost basis is the price at that time.

However, if you're sending the actual crypto, its cost basis and holding period may stay the same, which can affect whether they pay short- or long-term capital gains. You may want to share this information with them as it could affect whether and how much they'll have to pay later.

Is Crypto a Good Gift?

Similar to giving a gift card for a retail store, giving crypto can be a fun way to recognize and honor someone's interests or share your interests with others. Plus, it's a gift that could wind up being worth a lot more in the future. But also consider whether the crypto will be difficult for the person to manage and how you'll feel if the crypto winds up dropping in value instead.

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