GoFundMe Tax Rules May or May Not Affect Your Tax Bill
The GoFundMe tax rules shouldn’t determine whether you give to a good cause. And the GoFundMe tax rules shouldn’t necessarily keep you from accepting help. But you may keep from getting surprised on tax day if you know the rules ahead of time.
GoFundMe Tax Rules for Donors
When you make a donation through GoFundMe or another crowdfunding organization, it’s usually not going to be tax deductible. A gift to campaign to raise money for someone’s medical bills, create a memorial, help with legal expenses or something similar is a generous deed. But it doesn’t count toward lowering your tax bill. That’s because the recipient of GoFundMe money usually isn’t a federally recognized non-profit organization. If the campaign is geared toward funneling money to a 501(c)(3) charity, however, then you can take a deduction.
Getting something in return for your donation also affects it for tax purposes. If you get a $20 tote bag, for example, you can only deduct the amount over $20.
GoFundMe Tax Rules for Recipients
There’s good news for someone who receives the proceeds from a GoFundMe campaign: Crowdfunding donations are considered gifts, not income. You normally don’t pay tax on gifts, right? (Paying tax on that ugly sweater you got from your sister would be adding insult to injury.) Even if someone gives you a million dollars, the IRS can ‘t collect any tax. But anyone giving more than $16,000 to one recipient over the course of a year will have to report it on their tax return. (But they won’t necessarily pay tax on it; gift tax is a topic for another blog post another day.)
There are some exceptions. If you’re raising money to produce the new flying skateboard you invented, the IRS considers that income. In essence, you’re selling something.
It can be the same for some “gifts” that have a political bent. If you take some crazy political stand and then get death threats because of it, some people may contribute to your security expenses. But there’s a reasonable chance that the IRS will rule that the money you raise to build your bunker is income.
Something else to bear in mind? The government is requiring any service that makes payments to individuals to file a 1099-K when the total paid out is more than $600. That doesn’t mean you’ll pay tax on it, but you have to file that 1099-K with your tax return, and the feds will already know that you’ve received the funds.
The growth of GoFundMe and other crowdsourced fundraising sites has provided a much-needed financial boost for countless individuals who otherwise may not have gotten any help. So you can feel good about giving! Just remember the tax rules.
GoFundMe has a section on its website specifically for non-profit organizations.
This article lists the best crowdfunding websites serving charities.
Lastly, you can learn more about our services here!