Cryptocurrency as a Reward — What You Must Know

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The considered giving or receiving crypto as a present would’ve been unparalleled two years in the past. Now, it’s utterly regular. One in 10 folks gave crypto as a present this previous vacation season, in line with a current survey by BlockFi. 

Nicely-known cash like Bitcoin and Ethereum each hit report highs in November, although they’ve dropped in worth since then. It’s grow to be simpler for on a regular basis traders to purchase digital belongings via platforms like Paypal and Venmo, and commerce them by way of apps like Robinhood and well-liked exchanges like Coinbase. Many of those platforms have made crypto reward giving even less complicated, selling particular options and performance for his or her customers.

However there are some issues you must think about should you gave or obtained crypto as a present in 2021, specialists say. 

Like taxes, for starters. Bitcoin and different digital cryptocurrencies are labeled as “property” and taxed like different frequent belongings comparable to gold or shares. So it’s possible you’ll must pay taxes in 2022 on any crypto given to you final yr should you made a revenue promoting it. Merely giving crypto to somebody isn’t a taxable occasion, except you exceeded the $15,000 reward tax allowance.

Gifting crypto can be quite a bit like gifting a lottery ticket. “The reward may very well be an enormous success on your family members or it might go to nothing,” says Grant Maddox, an impartial CFP based mostly in South Carolina.  

Then there’s the query of curiosity in crypto. Some folks could not wish to incorporate cryptocurrency into their portfolio, and see no worth in proudly owning it, says Chris Chen, a monetary advisor with Perception Monetary Strategists in Newton, Massachusetts.

However what crypto you select to provide sooner or later or got previously can go a great distance towards whether or not it has potential worth to the recipient, or is extra of a novelty reward. 

“If you happen to’re giving a bit of Bitcoin or Ethereum, I feel you’re getting nearer to really giving one thing of worth to somebody,” Chen says. “And at that time, it’s beginning to resemble a present of a share of inventory or one thing.”

What to Contemplate If You Gave or Acquired Crypto as a Reward in 2021

Bitcoin reigns supreme because the crypto of alternative for gifting and receiving, with Dogecoin and Ethereum coming in as second and third, in line with BlockFi’s information. However as with all new funding — whether or not you’re giving it or receiving it — it’s vital to do your analysis, and perceive all the dangers.

As extra on a regular basis traders surprise how cryptocurrency would possibly match into their portfolio, specialists suggest sticking to Bitcoin and Ethereum, and following the 5% rule — that’s, don’t contribute greater than 5% of your portfolio to dangerous belongings like crypto. It’s additionally really useful to deal with it as a long-term funding, however you must by no means spend money on cryptocurrency on the expense of different monetary priorities, comparable to saving for emergencies and paying down high-interest debt.

Right here’s what to think about should you gave crypto as a present final yr, or discovered your self on the receiving finish of such a present.

Tax Implications

So long as you gave lower than $15,000 value of crypto, it falls underneath the 2021 reward tax allowance. Meaning you gained’t have to fret about any tax implications that include the reward. 

“If you happen to give me any crypto that’s $15,000 or much less, there’s no tax implications,” says Chen. “If you happen to give me crypto that’s value $30,000, then the distinction between 15,000 and 30,000 is taxable as a present, and is taxable to you as the one that’s giving it.” 

Regardless of the reward tax allowance, recipients could should pay taxes on their crypto sooner or later – even should you promote it instantly after it’s been given to you. It is determined by the crypto’s capital good points or losses when the reward recipient sells or transfers it — principally, how a lot worth their holdings gained or misplaced in a given interval. 

In case your crypto good points worth over time, you’d expertise a capital achieve while you promote or switch it. The period of time you personal it performs a task in how a lot you’ll owe in taxes, too. Any crypto held for lower than a yr is a short-term achieve. If you happen to personal it for greater than a yr, it’s a long-term achieve. These variations can have an effect on which tax fee is utilized. The tax fee additionally varies based mostly in your general taxable revenue, and there are limits to how a lot it’s possible you’ll deduct in capital losses in case your crypto asset loses worth.

After all, there’s a vibrant aspect to owing taxes associated to crypto. “If you must pay taxes, which means that you’ve made cash,” says Chen.

The alternative of a capital achieve is a capital loss. In case your losses exceed your good points, you possibly can deduct as much as $3,000 out of your taxable revenue (for particular person filers).  

In case you are a DIY tax filer, check with the Type 8949 to reconcile your capital good points and losses, after which report them in your Type 1040 tax return utilizing Schedule D. There’s further data and instruments on the IRS’ web site that will help you decide your crypto-related tax legal responsibility, and tips on how to report it on its web site. 

Conserving an in depth transaction historical past will turn out to be useful come tax season, whether or not you file your personal taxes or work with a tax professional. 

As a brand new and evolving asset class, anticipate numerous modifications to how crypto is regulated within the coming years, and search out tax professionals who’ve expertise and familiarity with digital belongings for a fair smoother submitting course of.


Crypto is a high-risk, high-reward funding. In different phrases, there’s an opportunity your crypto sees massive worth development for years to come back. However there’s simply as seemingly an opportunity it loses its worth solely, leaving you with nothing however the expertise. If you happen to’re giving crypto as a present, you would possibly wish to make certain the recipient understands these dangers of proudly owning and investing in cryptocurrency. 

Simply check out Bitcoin: It reached an all-time excessive of over $68,000 in November 2021 after beginning the yr at just below $30,000. In the meantime, Ethereum has shot up from about $737 to round $4,000, relying on the day. And it isn’t uncommon for both of them to lose 15% of their worth in a day.

Whereas volatility generally is a massive draw back to gifting crypto, it will possibly equally be an upside relying in your notion of crypto, says Chen. “If you happen to bought Bitcoin, it might undergo the roof or via the ground. There are folks on the market who say that Bitcoin is the way forward for Bitcoin and Bitcoin goes to take over. And if that’s the case, then the worth horizons for Bitcon are infinite.”

Buy Course of

If you happen to resolve to provide cryptocurrency as a present sooner or later, you’ll want to determine the way you’re truly going to ship it. Whereas cryptocurrency was a preferred reward final yr, many individuals lack data on tips on how to truly do it, in line with BlockFi’s information. 

Two frequent methods to provide crypto are via reward playing cards that may be redeemed for crypto or sending it on to somebody by way of an trade from one crypto pockets to a different. If you have already got a crypto trade you want, that is likely to be the perfect place to start out because it comes with the advantage of first-person expertise that may be shared along with your recipient.

However each the reward giver and the recipient will want a crypto pockets or trade account to finish the transaction, which generally is a little extra sophisticated. If you happen to’re giving crypto to somebody who doesn’t have already got an account or pockets, they’ll must set one as much as obtain the reward. 

Crypto reward playing cards contain third-parties that may improve the complexity for each the recipient and the sender. No matter route you go, take care to grasp and share what will likely be wanted of your recipient to efficiently obtain the reward. 

Transaction Prices

Charges are one other factor to think about, which are sometimes charged per transaction, and might differ whether or not you’re the vendor or the customer. There are various completely different charges relying on which currencies you commerce, so it’s vital to grasp precisely how and when an trade can  cost you on your crypto transactions.

Coinbase doesn’t cost for transferring crypto from one Coinbase pockets to a different, for instance. However the recipient will likely be charged a charge in the event that they promote or transfer their gifted crypto off of the Coinbase platform, which might eat into the worth of the reward. “The transaction prices are fairly excessive normally,” says Chen. 

Restricted Data or Curiosity

Crypto turned wildly well-liked in 2021, however loads of folks nonetheless don’t have any curiosity or restricted data of it. If you got cryptocurrency, think about whether or not you wish to promote it instantly or preserve it as a long-term funding – and the way that will play into your taxes this yr. “There’s nothing mistaken with giving or receiving crypto,” says Chen. “You simply have to be clear as to what you are able to do with it.”


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