Is GoFundMe Taxable In The US?
Have you ever donated to a GoFundMe or made a fundraiser yourself? If the answer is yes or you’re thinking about doing so, you might be wondering ‘is GoFundMe taxable income’ and ‘are GoFundMe donations tax-deductible?’ Unfortunately, the answer to those questions isn’t as easy as a simple yes or no. As a donator, the answer can be complicated and there are many factors that come into play when determining whether or not donations made through the site are eligible for a tax deduction. As for running a GoFundMe campaign yourself, the question of whether or not your received donations are classed as taxable income will depend majorly on yourself and the type of campaign you’ve set up.
Whether you’re a donator wanting to know the answer to ‘are GoFundMe donations tax deductible’ or you’re an organizer looking for the answer to ‘do you have to pay taxes on donations received from GoFundMe’, you’ll find all the relevant US GoFundMe FAQs below!
Are GoFundMe Donations Tax Deductible As a Donator?
Are GoFundMe donations tax-deductible if you’re the one donating them? The answer is sometimes, but not always. The problem with donating to GoFundMe campaigns is that anyone can set one up, which makes claiming tax deductions for donations a bit tricky. If you’re donating towards a personal GoFundMe fundraiser, your donation will be classed as a personal gift and so there’s no guarantee that this will be tax deductible. If you’re donating to a charity or non-profit organization, however, your odds for tax deductions are better. Donations made to GoFundMe charity fundraisers within the US are guaranteed to be tax deductible and you should receive tax receipts from PayPal Giving Fund who partner with GoFundMe as their charity partner.
Types Of Fundraisers
If you want to make a donation to a GoFundMe campaign but you’re dead set on your donation being tax deductible, then you’ll have to avoid personal GoFundMe fundraisers made by individuals and you’ll need to learn which charity organizers are tax deductible.
Donations towards any of these organizations or campaigns on GoFundMe will be tax deductible:
War veterans’ groups
Nonprofit schools and hospitals
Expenses incurred from a student living with you
Federal, state, and local governments
Payroll deductions to charities through your employer
Donations towards any of these organizations or campaigns will not be tax deductible:
Gifts donated to individuals
Political parties, action committees, or fundraisers
For-profit schools or hospitals
Social and sports clubs
If you’re ever unsure of whether or not a donation to a charity fundraiser will be tax deductible or not, you can always double-check the IRS’ charitable contributions guide.
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, you’ll want to make sure that the organization you’re 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.
Also read: Are Home Improvements Tax Deductible?
Claiming Tax Deductions As A Donator
As long as your donation is to a certified charity, registered with and recognized by the government and regulated by federal or state law (AKA a 501(c)(3) organization), you’ll be able to claim tax deductions. So now that you know the answer to ‘are GoFundMe donations tax deductible’ is a yes for certain charities, how can you claim tax deductions?
Tax deductions have to go through the IRS, so how much you can claim depends on their rules. Currently, the IRS only allows individuals to deduct charitable contributions up to 50% of their adjusted gross income, although there have been cases of 20% and 30% limits, too.
What Is Gift Tax And How Does It Affect Me?
If you haven’t heard of Gift Tax, it’s a federal tax that donors have to pay when gifting something of value to an individual (including charities) without expectation of any repayment or rewards. Gift Tax will only affect you if you plan on donating more than $15,000 per gift recipient per year, so if you’re asking ‘are GoFundMe donations tax deductible when above a certain amount’ the answer is no.
If you’re married and you’re planning on filing a joint return, your donation limit increases to $30,000. In other words, you and your partner can each claim a $15,000 exemption for charitable donations. The rates for Gift Tax depend on how much you decide to donate and can range from 10% to 40%. Donations above $15,000 by $10,000 or less are 10%, while donations above $15,000 by $1 million or more are taxed 40%.
Is GoFundMe Taxable Income?
So, the question ‘are GoFundMe donations tax deductible’ has been answered, but what about those that are running the Fundraisers? Do you have to pay taxes on donations received from GoFundMe? Before deciding to set up a GoFundMe campaign, it’s completely reasonable to ask the question ‘is GoFundMe taxable income’, and most of the time, the answer is a yes, but it can depend on a few circumstances. What’s classed as taxable income is different in every country, so we can’t say for certain for everyone, but for those asking ‘is GoFundMe taxable in the US’, it’s a no - unless your donations can’t be considered as a gift.
Typically, the IRS considers donations to GoFundMe campaigns as personal gifts, which don’t fall into the income category in the US - so is GoFundMe taxable in the US, you ask? If you can class the donations as a gift and they’re under $14,000, then no, you don’t have to pay tax! To be able to class donations you have received as gifts, you can’t give anything to your donors as this will look more like a payment for services, goods, or rewards, rather than a gift. This rule goes for all types of online fundraising, like Kickstarter, Indiegogo, and GoFundMe. Giving your donors some sort of item or service for their donation is classed as reward-based crowdfunding, which is taxable. You can read our Payroll and Income Tax Guide for further income tax information and guidelines.
Once you offer something in return for donations, you’ll be expected to report any profits from the donations as income, however, you can minus expenses related to the service or goods you’ve given to the donor. So, unless your donations can be considered as gifts, the IRS will want a share!
Using GoFundMe To Start A Business
Crowdfunding is an extremely popular way of sourcing money when it comes to starting a business, so if you’re looking to start up your own business, GoFundMe is an appropriate crowdfunding source. Depending on how you run your GoFundMe campaign, you might have to pay some taxes. The main things to consider are intent and exchange tax liabilities.
Intent Of The Fundraiser
The intent of your fundraiser is vital for figuring out your tax liability. If the organizer's intent was to raise funds in exchange for goods or services, your donations will be taxable - even if the goods or services you were offering were for free.
For example, if your new business is struggling to take off, you might try crowdfunding to keep your business afloat and offer your donors one of your business inventions in exchange for their donations - this would be classed business income, so you’d have to report donations.
If you for example want to raise funds to cover the cost of medical bills, life events, and other expenses, and none of your donors received any goods or services for their contributions, the donations would be considered gifts that are not taxable. However, instead of offering your donors a gift, service, or invention, you could offer them stock in your company. This is referred to as equity crowdfunding, and any profits that result from these donations are not classed as income and so aren’t taxable.
Equity crowdfunding is technically an investment, as you give donors equity in your business in exchange for donated money. If you use donated funds to pay yourself, however, this would show on your paystubs and will be classed as your income, therefore it’s taxable. It’s important to note that some crowdfunding sites will issue a Form 1099-K to whoever the funds are transferred to. The crowdfunding site or the third-party processor will be required to complete the form. If the donations you receive are over $20,000 or you get more than 200 transactions made in that calendar year., then this form will be copied and sent to the IRS and the organizer.
Also read: The Difference Between Forms 1009 and W2?
Tips For Starting A Gofundme Fundraiser
Calculate Your Goal Amount
Before you start setting up your GoFundMe campaign, you need to work out the number of funds you want to raise - this is your goal amount. Think about your cause and what the money will go towards and then figure out how much you’ll need to fulfill the cause of your campaign. Once you’ve set a goal amount it will help any potential donors understand how much money you need to raise. People are more likely to give money towards a goal amount that has been clearly worked out and defined, so be sure to show your costs clearly in a total cost breakdown on your description page.
For example, if you’re raising money to undergo a medical procedure, you can list not only the expense of the procedure, but other related expenses such as medications for afterward, loss of income for being off sick, and any rehabilitation you might need afterward.
Be Honest About Your Cause
Whether your fundraiser is for a personal cause or for a charity, you’ll need to explain what it is you’re raising funds for and why it’s 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 (who, what, when, where, why, how) will also help donors better understand your fundraiser, which will make donations more likely. You’ll 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 you’ll need to try and stand out to potential donors.
Share Your Fundraiser
Once you’ve set up your fundraiser, you’ll want to share it with friends and family. Getting friends and family to make donations is a great way of increasing your donations as other donors are more likely to donate if they can see that some funds have already been raised. You can then work on promoting and sharing your GoFundMe campaign on social media and online forums. You can share a link to your fundraiser on your social media accounts and specific fundraiser forums and pages on Reddit and Facebook. If you’re willing to spend some money, you could create flyers and bulletin boards to spread the word physically, or you could pay for online ads such as Facebook boosts or email marketing to send out newsletters.
When you get a donation towards your fundraiser, always thank the donor. Whether it’s a reply on GoFundMe or a personalized email, you should show your donors that you appreciate their donations. When an individual donates to a GoFundMe campaign, it’s because they believe in your cause - so make sure you pay them back with a thank you!
All your GoFundMe questions should now have been answered, so you’ll be able to sift through your taxes with ease. Whether you’re looking to donate to a good cause, or you want to set up your own GoFundMe fundraiser, you have all the knowledge you need. Happy fundraising!