Part 8: Gifts & Donations — The IRS Rules Everyone Forgets

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🎁 Gifts & Donations — The IRS Rules Everyone Forgets (Crypto Edition)

Crypto gifts and charitable donations can unlock powerful tax benefits — but only if you follow the IRS rules exactly.
Whether you’re giving Bitcoin to family members or donating tokens to a qualified charity, the tax treatment changes depending on holding period, valuation, and documentation.
Here’s how to avoid mistakes and maximize deductions in the 2025 tax year.



📖 Table of Contents

1️⃣ Crypto Gifts — What Counts as a Gift?

A crypto gift occurs when you transfer digital assets without receiving anything in return.
The IRS treats crypto gifts the same way as gifts of stock or property.

  • Sending Bitcoin or ETH to family
  • Giving NFTs to friends
  • Transferring tokens to someone without compensation

Important:
Crypto gifts are not taxable to the giver or the recipient — unless gift tax rules apply.

2️⃣ Gift Taxes & Annual Exclusion Rules

The U.S. gift tax system applies to crypto the same way it applies to cash or stocks.

Key limits for the 2025 tax year:

  • $19,000 annual exclusion per recipient (2025)
  • Unlimited gifts to U.S. citizen spouses
  • Form 709 required if you exceed the annual exclusion

Example:

You gift 0.4 BTC worth $20,000 to a friend.
→ $19,000 excluded (2025 annual exclusion)
→ $1,000 must be reported on Form 709
(In most cases, no actual gift tax is owed.)

3️⃣ Donating Crypto to Charity (FMV Rules)

Donating crypto to a qualified 501(c)(3) charity can provide large tax deductions.

If held more than 1 year:

  • You deduct fair market value (FMV)
  • No capital gains tax on appreciation

If held 1 year or less:

  • You may deduct the lesser of FMV or cost basis

Tip:
Directly donating appreciated crypto often yields higher deductions than donating cash.

4️⃣ Documentation the IRS Requires

The IRS requires specific records for crypto gifts and donations:

  • Wallet addresses of sender and recipient
  • Date and time of the transfer
  • Transaction hash
  • Fair market value at the time of gift/donation
  • Charity acknowledgment letter (for donations)

For donations $5,000 or more:
A qualified appraisal is required unless done through certain crypto-processing charities.

5️⃣ Real-World Examples (BTC, ETH, NFTs)

BTC Gift Example

  • You gift 0.1 BTC purchased at $8,000, now worth $35,000

→ Recipient takes your $8,000 basis

ETH Donation Example

  • You donate ETH held 18 months worth $10,000

→ You deduct $10,000 FMV

NFT Gift Example

  • You gift an NFT originally bought for $900, now worth $250

→ Recipient’s basis = $250 (lower value rule)

❓ Frequently Asked Questions

Q1. Are crypto gifts taxable?
No. Only gift tax filing may apply if limits are exceeded.

Q2. Do recipients owe tax when they receive a gift?
No — they only owe tax when they sell it.

Q3. Can I donate NFTs to charity?
Yes, but documentation and appraisal rules may be stricter.

📚 EA Tax Guide Kindle eBooks

This section contains Amazon affiliate links.

*Amazon affiliate links included. As an Amazon Associate, I earn from qualifying purchases.

Recommended Crypto Tax Resources:

📚 Crypto Taxation Series (2025)

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