GoFundMe Donations Are these donations tax deductible?
Aside from contribution-only donations to established 501 charities, the gift/non-gift distinction has always been rather subjective. For example, assume you give money to a children’s choir which then performs at your wedding. The financial value of that quid pro quo is subjective, at best.
Until further guidance is issued, it is important to maintain records of your crowdfunding contributions and receipts and consult with your tax professional on the implications. Crowdfunding is a method of raising money through websites by soliciting contributions from a large number of people. The contributions may be solicited to fund businesses, for charitable donations, or for gifts. In some cases, the money raised through crowdfunding is solicited by crowdfunding organizers on behalf of other people or businesses.
A letter from O’Donnell with that information erased what was owed. But O’Donnell says don’t let yourself get caught off guard by keeping your CPA in the loop. Even if your paying for yours or your dog’s medical bills or any other popular cause, you could end up owing Uncle Sam depending on how much you raised.
Types Of Charitable Contributions That Are Tax Deductible
You may not have to pay taxes on that income in some situations, though. The funds that your business spends on a project might be considered deductible business expenses. If they reduce your taxable income by the same amount as the donations, then the donations are likely offset by your business expenses. You wouldn’t end up paying federal income tax on the donations, even if they are technically taxable. You resort to crowdfunding to raise money to keep it going until you begin to turn a profit. Maybe you offer donors the gadget you’ve invented as a gift in exchange for their money (reward-based crowdfunding).
The easiest way to tell is if the GoFundMe account is a Certified Charity campaign. If it is a standard campaign, the management of the funds is by individuals or a group of individuals. If this is the case, the individuals can withdraw funds as they need and deposit them in their personal accounts.
Given the guidelines discussed above, this task will be difficult, but certainly not impossible. Some may consider these transfers as donations, mainly because the donor receives nothing in return. But that`s not a clear line, as donors can donate money to GoFundMe and other campaigns for any cause.
It can include religious organizations, recognized charities, and educational organizations. The best way to know if your donation is tax-deductible is to consult with a tax advisor. They will be able to tell you for sure whether or not your donation is deductible.
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In fact, GoFundMe has reportedly had more than 50 million donors, who have raised more than $5 billion, since its inception. Ebony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries.
- Instead, the money goes directly to the charity via the PayPal giving fund.
- What is important to note for donees is that anything reported to the IRS on a 1099 will likely lead to a matching notice if not properly reported by the recipient.
- In partnership with USAID, GoFundMe.org is sending donations from the Global Food Fund to effective organizations addressing food security.
- If you donate via ACH/wire, check, crypto, DAF, or stock then certain bank or other transaction or administrative fees may apply.
- You may either wish to donate a larger amount, so that a set, predetermined amount of money goes toward the cause.
Beverly has written and edited hundreds of articles for finance and legal sites like GOBankingRates, PocketSense, LegalZoom, and more. In addition to GoFundMe, there are other crowdfunding sites like Kickstarter and Indiegogo. The focus of this article is whether or not any donations made on the GoFundMe website are tax-deductible, and the implications of this and what it means to you and to the cause. Please read through the fundraiser you think you might qualify for and see if there is anything that needs to be added to your GoFundMe fundraiser, like a hashtag or phrase, to ensure you are in our review queue. GoFundMe.org uses the GoFundMe fundraising platform and other platforms such as YouTube, Facebook, and Omaze.
If you’ve heard about someone who has tried to raise funds for medical needs, home renovations, or funeral arrangements, they most likely used donation-based crowdfunding. It is one of the easiest ways to solicit gifts from friends, family, and even strangers for a cause. When you are calculating your income tax due, the IRS allows you to deduct charitable contributions up to 50% of your adjusted gross income, thus reducing your annual tax burden.
Receiving a 1099-K doesn’t automatically mean the funds are reportable as income or that the money will be taxed. It still comes down to the nature of the fundraising campaign and whether the donor receives anything for the money they donated. If you raise money for a business project, the costs of the project may offset some or all of the taxable income. Basically, the IRS received a copy of the 1099 showing proceeds and tried to match it up to her tax return, but she didn’t record the income on her return. Without her recording the income the way we have suggested, the IRS has no way to know that the proceeds should not be taxable. As a general rule, across the USA you can deduct certain charitable donations from your taxes, thus reducing the amount of money you owe the federal government.
This lack of guidance has caused quite a bit of disparity for both donors and donees when it comes to the tax reporting of GoFundMe transactions. GoFundMe, being merely the administrative platform, will not report donations as income or issue any tax documents to donors or donees. Generally, the funds raised through GoFundMe are processed by a third-party organization, such as Pay Pal. Per IRS requirements, the third-party payment network must issue a Form 1099-K when the aggregate number of transactions exceeds 200 and the total value exceeds $20,000.