Top 6 Tax-Free Ways to Transfer Cryptocurrencies

Rohan Pinto

For just a small window of time, Bitcoin and other cryptocurrency seemed to be unstoppable. Their value kept increasing and there was no legislation that was set up to police its use yet. But then the governments of the world stepped in and capitalized on them through taxation. Now, crypto conversion and transactions are taxed but there are still ways you can transfer cryptocurrencies and still avoid taxation, you just have to be creative and learn to explore new ideas.

Donation to Charity

One way people transfer cryptocurrencies while avoid being taxed is through donations to a charity. It seems wise to donate your Bitcoin or Ethereum to a qualified charity and you’ll even get a tax deduction. This is set up to encourage big corporations to donate a large sum of their earnings to charitable organizations.

Contributing to a Corporation or Partnership

You can also swap crypto assets with stocks option to a corporation or partnership. The process is a little more nuanced but to summarize, contributing your crypto assets to an S corporation or a C corporation in exchange for stocks will not be necessarily taxed. There are many requirements that need to be met before this can take place, though. While you won’t be taxed for the initial transaction, it can be taxed later when the shareholder sells the stock.

Cryptocurrencies as a Gift

There is always the option of giving cryptocurrencies as a gift. There is no income tax if in giving out gifts to both the giver and the receiver. Only when the gift is transferred or sold will taxation be necessary. Transferring currency as a gift can be tricky though. The IRS has heard a lot of these excuses and will be quite critical in scrutinizing these transactions. It’s important that in gifting cryptocurrencies, it has to be in a specific setting. If you’re an employer “gifting” crypto to an employee, that won’t be considered a gift. You also have to be cognizant of the gift you give even to friends or family members. Any gift that’s more than $15,000 will require a gift tax return.

Invest in Gold

Investing in gold with cryptocurrency is also another option. Buying gold with crypto has been made easy with being able to swap assets for gold. Precious metal merchants offer a way to transfer crypto assets and still avoid being taxed.

Buy Life Insurance Policies using Cryptocurrencies

Another smart way to transfer crypto asset is to buy life insurance policies using cryptocurrencies. Many high ranking officials buy offshore life insurance because they know they get a tax break, unlike regular life insurance policy. Offshore private placement life insurance can even be transferred to your heirs without any inheritance tax.

Transfer Your Cryptocurrencies Overseas

Other countries also haven’t adapted to the cryptocurrency boom. Meaning, they haven’t set up legislation to regulate its use in the market. So transferring your cryptocurrencies overseas could give you a tax break. But this could change once these countries follow suit and start policing this new currency. Some people have even gone so far as to move to a tax-free country. This way, there is little regulation and thus they can freely move their crypto assets around. In conjunction with this option, you can be an expatriate in another country with lenient crypto taxation. To be more extreme, you can give up your citizenship and apply for a different one in another country. This is more drastic a move, one that not many people can do. But for those with enormous crypto assets, this might be a last-ditch option to ensure that all your Bitcoin or Ethereum and many other cryptocurrencies are intact and safe from the greedy hands of the government. Germany has been one country known to consider cryptocurrency as private money and therefore is not taxed. Switzerland, in particular, considers Bitcoin to be foreign currency and so exempts it from capital gains tax.

People are quick to take advantage of cryptocurrencies potential now that it’s fairly new with little information available to the general population. But that is slowly changing as more and more people study how crypto assets affect global trade and transaction. More and more countries and banks around the world agree that these “internet currencies” should be regulated which means eventual taxation.

Author Bio:  Annah Brooks, a frequent traveler and numismatist, loves to write about little-known facts and fun stuff about coins, travel, health and food. She is currently working for First Fidelity Reserve, which specializes in rare United States coins and precious metals, including gold, silver, and platinum bullion and provides superlative service, insightful analysis and comprehensive consultation for rare coin investors and collectors.

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Meet the Author

Rohan Pinto

Co-founder of 1Kosmos

Rohan is the co-founder of 1Kosmos. He is a go-to security and identity management expert and the founder of several businesses that have made considerable advancements in blockchain and identity management.