Bitcoin Forum

I was commenting in a thread (https://bitcointalk.org/index.php?topic=5180850.msg53451823#msg53451823) securing Bitcoin for inheritance and made the comment that if there is some asset you're going to give away after you die, it's usually better to give it away earlier and that made me think to post this year-end reminder:

For those fortunate enough to have a decent amount of highly appreciated Bitcoin: giving it away to less fortunate friends and family can be both a generous and tax efficient way to deal with it.

In the US, gifts of up to $15,000 per person per year (twice that if married) can be gift without triggering any gift tax (https://www.bogleheads.org/wiki/Gift_tax), diminishing your lifetime gift tax exception (and even if your current holdings don't put you at risk of estate taxes (https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States), bitcoin value could go up or estate tax thresholds could go down...), or requiring any tax reporting.

The recipient of your gift inherits the cost basis and holding period (https://www.thebalance.com/selling-gift-property-3192977).  Giving to family and friends who pay lower taxes than you (due to lower income, better deductions, etc.) is tax efficient because they pay the taxes at rates that apply to them if/when they sell your gift.

For example, say you have a sibling that only worked part of the year and earned $24,000.  You could gift them up to 2.1 BTC which you acquired years ago for $100, and they could sell it and pay no capital gains tax (because the LTCG rate for <$39,375 in income is 0%).   That's an extra $2236  (or $3548.58 if you are fortunate enough to have a 23.8% marginal LTCG rate) that stays among friends and family instead of getting paid in taxes compared to you selling the coins yourself and gifting cash or purchases using the proceeds.

Gifting away from ATH's works better, because the limits allow for more coins.

A big stash of Bitcoin doesn't do you any good after you're dead, and for people you'd otherwise consider bequeathing your coins to ... they would usually benefit more to receive them earlier and doing so can be a lot more tax efficient as an added bonus.

[Giving appreciated assets to a charity can have additional tax benefits, but because of recent changes to US tax code-- it's much harder to make use of those benefits than it used to be.  The standard deduction is so great now that you'd have to give a really large amount to overcome it, particularly with state taxes no longer creating a reason to itemize for many people. If you do intend to give to a charity it can be best to batch all donations up into a single year, potentially via a donor directed fund, so that you can just use the standard deduction in later years.]