Reporting Your Gofundme Donations
GoFundMe does not provide any paperwork or proof of your donations. They are just the administrative platform, serving as the middleman between the recipient and donors. The money itself passes through PayPal who may issue documents for tax purposes.
It is up to you to keep careful records of the donations you make, including receipts showing who you paid and how much. If you are unsure if the contribution you made was to a recognized charity, talk to a financial advisor to determine if it is is tax deductible.
Keep careful records if you organized a GoFundMe
If you are the organizer of a GoFundMe to help someone in need, keep a careful record. If your campaign earns over $20,000, the payment processor must send you a 1099-NEC. Usually, a 1099-NEC means you earned income and owe taxes on it.
With proper proof, you can show where the Gofundme donations went who it is paid to so that you can prove that you did not earn this money but rather helped someone in need.
Most GoFundMe donations are not tax deductible. Their website even mentions that donation to a personal GoFundMe fundraiser is generally considered to be personal gifts and are not guaranteed to be tax-deductible. Unless you donate to GoFundMe.org, it is not to a registered charity. While you are helping someone in need, which is a glorious thing to do especially given the COVID-19 pandemic the world is experiencing, you cannot deduct it from your taxes.
CPA for Small Businesses
That Money You Donated To A Gofundme It Probably Isn’t Tax
The money you donated to a GoFundMe campaign probably isn’t tax deductible.
There has been no shortage of need during the pandemic. And to help meet it, friends, neighbors and customers have set up hundreds of thousands of crowdfunding campaigns.
GoFundMe estimates that an American has started a Covid-related fundraiser on its site every two minutes since March 2020.
But donors shouldn’t assume their contributions are tax deductible.
And fundraising organizers should not assume the money they have raised won’t be taxable.
How Can I Tell If A Gofundme Fundraiser Is A Personal Or Charity Fundraiser
If you want to make a tax deductible donation to a GoFundMe fundraiser, youll want to make sure that the organization youre donating to is a charity and not a personal organizer. If a fundraiser is being organized by a charity, you should be able to see the name of the charity next to the name of the GoFundMe organizer on the fundraiser page.
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What About That Dgr I Donated To Through A Gofundme Or Facebook Campaign
In Australia, a tax deduction is available for donations to DGR fundraisers on GoFundMe and Facebook as both platforms have partnered with PayPal Giving Fund.1 Donations to a Facebook or GoFundMe fundraiser eligible for a tax deduction actually go to the PayPal Giving Fund, a DGR listed public ancillary fund that makes grants towards the donors recommended charity.
How Giving On Gofundme Works
Donations to nonprofits are usually tax deductible. The IRS allows you to deduct up to 50% of your adjusted gross income if the donation is made in cash, although 20% and 30% limits sometimes apply. For 2020 and 2021, the 50% limitation is suspended, allowing individuals to donate up to 100% of their AGI. Thus, giving to specific 501 organizations on GoFundMe could prove to be a good way to reduce tax burden. Just be sure to get your receipt from the PayPal Giving Fund. Remember that personal donations through GoFundMe are likely not tax deductible.
To claim any possible deduction, itemize deductions on your tax return using Schedule A . Typically, charitable donations could be eligible for deductions if they are given to:
- A religious organization
- Federal, state and local governments
- Certain war veterans groups
- Homeowners associations
Note that a large percentage of donations on the GoFundMe platform are to individuals, making them non-deductible.
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Note Any Personal Benefits And Incentives
If you receive any incentives or personal benefits from your donation, the IRS requires you to subtract that cost from the amount you plan on claiming as a charitable donation. For example, if you receive tickets to an event valued at $25 for your donation of $200 to an organization, you could only claim $175 as a charitable donation on your taxes.
Use An Established Platform
If you donate to an individual cause, consider donating through an established platform like GoFundMe. While its not foolproof, such platforms do offer an additional layer of protection. For example, GoFundMe notes that its team proactively monitors our platform for any form of misuse or abuse and investigates all reported issues. They also offer a limited guarantee.
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Be Honest About Your Cause
Whether your fundraiser is for a personal cause or for a charity, youll need to explain what it is youre raising funds for and why its so important. Powerful, emotive stories will get the most attention from donors – but whatever you write has to be honest, so no lying!
To help you write your GoFundMe story, here are a few pointers to explain your cause:
What will the funds be used for?
How are you connected to the cause?
How will these funds help you or others?
Why do you or your organization need donations?
Other basic information such as the 5W1H will also help donors better understand your fundraiser, which will make donations more likely. Youll also need to come up with an eye-catching title for your fundraiser, after all, your fundraiser will be one of thousands on the GoFundMe website, so youll need to try and stand out to potential donors.
Donations To Gofundme / Crowdfunding Campaigns
If you are donating to a GoFundMe Personal campaign, the IRS considers this a personal gift which is generally not tax deductible. In fact, if you give more than $14,000 to any one person, or $28,000 if you are filing jointly, you must pay a gift tax on that monetary donation.
If you donate to a GoFundMe Certified Charity campaign, your donation is tax deductible and can be written off. GoFundMe has a program that certifies their listed Charity campaigns as being run by an actual 501 non-profit.
GoFundMe provides a Certified Charity badge that will appear below the Campaign Organizers name. In order to ensure you get the appropriate tax write off, be sure to keep a copy of your donation receipt from GoFundMe.
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How Is Gofundme Funded Does A Full Donation Go Directly To Each Cause
On a side note, since there is no fee for setting up a GoFundMe page, as mentioned earlier, you may be wondering how the GoFundMe website can afford to keep running
It turns out that GoFundMe deducts a small transaction fee for each donation. This comes to 2.9% plus 30 cents of each transaction. This covers the cost of payment processing.
Its also worth noting at this point that there is a minimum donation amount of $5 per donation.
So long as each donation meets the minimum amount, donors can give any amount of money they want to the cause in question.
What Are The Tax Benefits Of Giving To Charity
The tax benefits of donating to charity are simple: Deducting charitable donations from your taxes may reduce the amount of money youll owe to the Australian Tax Office come June 30th, depending on your individual tax situation. Many businesses and high earners often take advantage of these tax exemptions for limits and donate huge chunks of money to nonprofits. But even if youre not donating billions of dollars like Bill Gates, certain charitable contributions might still help reduce the your tax burden.
Explore Certified Charity Fundraisers on GoFundMe to donate to
In the age of crowdfunding, it has never been easier to support your favourite charity. Technology has changed the way people all over the world help others. Lending a digital hand to those in need is now effortless, and finding best charities to donate to takes no time at all. To help, we have shared some recent charity fundraisers that need your help below or you can search the Australian charity database here.
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Gofundme Receipts And Irs Rules
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 childrens choir which then performs at your wedding. The financial value of that quid pro quo is subjective, at best.
Crowdfunding contributions have muddied the waters even further. Some might consider these transfers gifts, largely because the donor receives nothing in return. But thats not a bright line, since donors can contribute money to GoFundMe and other campaigns for any purpose whatsoever.
Congress has made no laws on the subject, and the Internal Revenue Service has passed no Federal Register rules on this topic. But tax planners still have something to go on.
Legal Guidelines from the IRS
Crowdfunding transfers do not fit neatly into the gift or non-gift categories. There is normally no relationship between the donor and the donee. This issue is certainly not unique to GoFundMe receipts. Uber drivers are not really independent contractors but they are not really employees either, and the list goes on.
- Capital contributions, and
- Gifts that come from a detached generosity and contain no quid pro quo.
GoFundMes site includes a disclaimer that most donations on GoFundMe are simply considered to be personal gifts which are not taxed as income in the U.S. But that declaration is hardly authoritative, and it is certainly not binding on the IRS.
The GoFundMe Gift Exemption
What About Online Fundraising And Charitable Tax Deductions
In the age of crowdfunding, it has never been easier to support your favorite charity. Technology has changed the way people all over the world help others. Lending a digital hand to those in need is now effortless, and finding best charities to donate to takes no time at all.
The top charity fundraising sites have done an incredible job of simplifying the giving process for donors and organizers alike. Reputable sites now offer fundraising platforms and issue tax-deductible receipts for donations made to certified charity fundraisers. They also give donors a way to easily track their donations in one place.
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Will I Get A Receipt For My Donation
Charity donations on GoFundMe are made to PayPal Giving Fund, a Public Ancillary Fund and charity registered with the Australian Charities and Not-for-profits Commission and deductible gift recipient. PayPal Giving Fund is the charity of record and will provide the donation receipt for your gift directly to your email after the donation has been made.
Tax Deductibility Depends On Where You Donate
Donation-based crowdfunding is one of the most popular sources of crowdfunding. If youve 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.
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Are Gofundme Donations Tax Deductible
Many of us tend to live just within our means financially, and this means that we want to ensure that we spend our money well and that as little as possible gets wasted.
And for many people, this becomes especially important when it comes to charitable donations.
If someone pledges a certain amount of money to a charitable cause, whatever that may be, they usually want the whole amount that they donate to go directly to that cause.
This is why its important to know beforehand whether or not any donations youd like to make to a good cause are tax-deductible. If it is tax-deductible, then this may affect the amount you wish to donate.
You may either wish to donate a larger amount, so that a set, predetermined amount of money goes toward the cause.
Or, if you dont have a lot of money that you could donate, this could put you off donating any money at all, which would be a shame.
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 feel free to scroll ahead to any section that jumps out at you. Here goes
Lets kick things off with a few basics
Crowdfunding Donations & Tax Preparation
Gofundme tax deduction? Every tax season the top names in tax prep software like TurboTax and H& R Block evolve to accommodate the ever-changing online tax landscape. Just a few years ago, crowdfunding was in its infancy, but now thousands of people give money to sites like GoFundMe and KickStarter, or start their own campaigns. These top brands, as well as every reputable tax professional, should be on top of exactly how to claim donations related to crowdfunding, if required.
This is another reason why I dont recommend free versions of tax software, as they are usually intended to handle only simple taxes, and arent sophisticated enough to properly handle most deductions.
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How Do I Know If My Donation Is Tax
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.
You can also check if a registered nonprofit organization creates the campaign youre donating to. If it is, then your donation should be tax-deductible.
You can also check if the campaign is raising money for a specific charitable purpose. If it is, then your donation may also be tax-deductible.
What Is A 501 Charity
A 501 charity is defined as a tax-exempt organization. The IRS has specific criteria that must be met before an organization can qualify for this status. The most important of these criteria is that the organization must provide public benefit to society as a whole. In addition, the IRS requires that a 501 charity be organized and operated exclusively for religious, charitable, scientific or educational purposes. Only donations made to a 501 charity are tax deductible. So, ensure that you check the status of the charity on the official IRS website before donation.
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Crowdfunding For Your Business
Starting or operating a business with crowdfunded money isnt usually a true gift. As such, it could be taxable income, but it depends on the details of the income.
Suppose your new business is struggling to get off the ground. You resort to crowdfunding to raise money to keep it going until you begin to turn a profit. Maybe you offer donors the gadget youve invented as a gift in exchange for their money . If you do, you will likely have to report the donation as business income, just like you would with any other sale.
Maybe you effectively issue stock in your company, and donors will receive a share in your enterprise in exchange for their money. This second incentive is often referred to as equity crowdfunding. Any profit that results from crowdsourced donations isnt technically income when its raised from equity crowdfunding. Its technically an investmentyou gave donors equity in your business in exchange for the donated money. Thats not taxable income for your business.
What Records Need To Be Kept
Taxpayers should keep records for all tax deductible donations made. DGRs will typically issue a receipt for donations made, however, there is no requirement for a DGR to provide a receipt. Donations made through a workplace giving program can be evidenced by an employees income statement or payment summary, or by written records from the employer.
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Are Gofundme Campaigns Tax Deductible Crowdfunding Donations & Taxes
Is My GoFundMe Campaign Tax Deductible? We are inching ever closer to this years tax day: Tuesday April 18. The deadline for filing your taxes can bring some stress to even the most relaxed person. How about if youve donated to a crowdfunding campaign like GoFundMe? What if you are the recipient of a campaign? Is GoFundMe tax deductible?
Be Aware Of The Gift Tax Rules And Their Exceptions
Donations made to a personal GoFundMe account are generally considered to be personal gifts, which are subject to gift tax. The general rule is that any gift is a taxable gift and the donor is responsible for paying the gift tax, but there are exceptions
- Gifts that are not more than the annual exclusion for the calendar year are not subject to gift tax. The limit in 2021 is $15,000 per donee.
- Tuition or medical expenses that are paid on someones behalf are subject to exclusion under IRC Sec. 2503. However, these costs must be paid directly to the qualifying educational or medical institution to qualify for the exclusion. This exclusion is in addition to the annual gift tax exclusion and is allowed regardless of the relationship between the donor and the recipient. Any donations made through a crowdfunding site for the payment of tuition or medical expenses would not qualify for this exclusion because they arent made directly to the qualifying institution.
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Deduction As A Normal Business Expense
Subscriptions and donations to various kinds of organisations purely for business purposes, eg as a form of advertising, may be deductible as an ordinary business expense. Similarly, a business that supports a DGR through advertising or sponsorship may be entitled to a tax deduction as a business expense.