As cryptocurrency prices soar, many holders are cashing in, gifting coins, or making charitable donations. However, one thing is certain—the IRS is paying close attention. Whether you’re selling, gifting, or donating your digital assets, understanding the tax implications is crucial to avoid surprises.
Crypto Sales and Capital Gains Taxes
The IRS treats cryptocurrency as property, meaning gains or losses are taxed similarly to stocks. If you sell crypto for a profit, those gains are subject to short- or long-term capital gains tax, depending on how long you held the asset. Even using crypto to purchase goods or services—whether a car or an art piece—triggers a taxable event.
The upside? If the market dips, you can offset other gains by harvesting losses. But remember, accurate record-keeping is key to calculating your cost basis and gain or loss correctly.
Heightened IRS Oversight
Since 2019, taxpayers must indicate on their tax returns whether they received or disposed of digital assets. Starting in 2025, new IRS reporting rules require brokers to provide details about crypto transactions, including cost basis, through Form 1099-DA. With this increased transparency, failure to report gains accurately could lead to audits or penalties.
The Justice Department has already prosecuted cases of underreporting, emphasizing the need for crypto investors to stay compliant.
Crypto Gifting and Charitable Donations
For those looking to share their crypto wealth, the tax code offers flexibility. You can give up to $18,000 in crypto per person annually without filing a gift tax return. Gifts exceeding this threshold require reporting but often do not trigger immediate taxes unless you’ve surpassed the lifetime gift tax exemption of $13.61 million.
Charitable donations of appreciated crypto also offer tax benefits. Donors can deduct the fair market value of their contribution, while the charity receives the full value. Donor-advised funds have become a popular way to streamline giving, allowing donors to support multiple causes over time.
Prepare for What’s Next
With new IRS rules on the horizon, now is the time to organize your digital asset records. Maintaining detailed transaction histories ensures you can meet reporting requirements and maximize potential deductions.
Whether you’re selling, gifting, or donating crypto, consult a tax professional to navigate the complexities of compliance. At BrilTax Advisors, we’re here to help you stay ahead in this evolving landscape. Contact us today for expert guidance tailored to your unique situation.
