Gift Tax
A tax that can apply when someone transfers crypto or other assets to another person without receiving full value in return, separate from the capital gains tax owed on a sale.
A gift tax is a tax that can apply when someone transfers an asset — including crypto — to another person without receiving full fair-market-value compensation in return, as distinct from the capital gains tax that applies when an asset is sold. Many jurisdictions provide an annual or lifetime exemption amount below which gifts don't trigger any gift tax liability at all, meaning most everyday crypto gifts between family or friends fall well under the threshold that would ever trigger actual tax owed.
Gifting crypto doesn't eliminate the underlying unrealized capital gain; it's generally only deferred, with the recipient typically inheriting the original giver's cost basis (see Kaavon's "Cost Basis" glossary definition) and holding period, meaning the recipient will eventually owe capital gains tax based on that original, inherited basis whenever they later sell the gifted crypto themselves, rather than the gift itself resetting the cost basis to the value at the time of the gift.
Examples
- A parent gifting crypto to their child generally passes along their own original cost basis to the child, rather than resetting it to the crypto's value at the time of the gift.
- Most everyday crypto gifts fall well under a jurisdiction's annual gift tax exemption threshold, meaning no actual gift tax ends up being owed on them.