What happens to cost basis when someone gifts crypto to a family member? When you give cryptocurrency to a family member as a gift, the IRS follows special rules because they treat crypto like property, such as a house or a stock, instead of cash. The most important thing to know is the "basis," which is usually the amount of money the original owner spent to buy the crypto. The person receiving the gift usually gets the same basis that the person who gave it (the donor) had. This is called a "carryover basis." 1. If you sell the crypto for more than what the donor paid for it, your basis is exactly what the donor paid. For example: Your mom bought 1 Bitcoin for $10,000. She gifts it to you when it is worth $15,000. If you sell it later for $20,000, your basis is $10,000. You would owe taxes on a $10,000 gain. 2. If the value of the crypto was lower than what the donor paid at the time they gave it to you, you must use the fair market value at the time of the gift to figure out your loss. Your mom bought 1 Bitcoin for $10,000. She gifts it to you when it has dropped to $8,000. If you sell it for $7,000, your basis for the loss is $8,000. You have a $1,000 loss. 3. If you sell the crypto for an amount between the donor's original cost and the value on the day of the gift, you do not have to report a gain or a loss. In the example above, if you sold the Bitcoin for $9,000, you would have no gain (because it’s less than $10,000) and no loss (because it’s more than $8,000). The amount of tax you pay depends on how long you held the crypto. If you use the donor's basis to figure a gain, you "tack on" their holding time to yours. If the donor held it for 6 months and you hold it for 7 months, you have held it for over a year (13 months). This qualifies you for lower "long-term" tax rates. If you use the fair market value for a loss, your holding time starts the day after you got the gift. For 2026, a person can give away up to $19,000 worth of crypto to one person without having to file a gift tax return. If you do not have proof of what the donor paid, your basis is treated as zero. This means if you sell it for $10,000, the IRS will tax you on the full $10,000 because they assume it cost you nothing. If a broker reports the sale on Form 1099-DA, they are supposed to apply these gift rules to the information they provide to the IRS. If the person who gave you the crypto actually paid a federal gift tax on it, you might be allowed to increase your basis slightly. You can add a portion of that tax to your basis, but only for the part of the gift that increased in value while the donor owned it.