How to file crowdfunding proceeds

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By Sabrina Parys

Crowdfunding organizations, such as GoFundMe, have made it easier than ever to raise and collect funds for personal causes.

If you found yourself at the helm of a campaign last year, or if you set up a fundraiser for another person, chances are that meeting your donation goal was top of mind. But there are also some important tax considerations to be aware of as you prepare to file.

The nature of your campaign and how you go about collecting funds play a big role in whether the IRS will deem the money you raised to be taxable. So, if you want to avoid a headache at tax time, knowing the rules helps.

Is crowdfunded money taxed?

Donations can be considered nontaxable gifts for tax purposes, according to the IRS. However, you may have to pay taxes on money raised in a crowdfunding campaign for a few reasons:

  • If donors receive something of value in return for their contribution, the IRS could consider the donation a sale, which would mean any profits could be taxed as personal income.
  • If an employer donates to a crowdfunding campaign set up to benefit someone who works for them, the contributions probably will not be considered a gift and should be added to the recipient’s gross income.

The same rules are in effect for funds you set up on behalf of another person, as long as the money was given to them as promised.

If you’re raising money for a business venture, things can quickly get more complicated, so it might be a good idea to work with a tax professional if you have any doubts about the taxability of your fundraiser.

Is GoFundMe tax-deductible?

On the other side of the aisle, people who donate to crowdfunding campaigns may be wondering if their generosity could score them a tax deduction. The answer? Typically not.

That’s because the IRS has strict rules about what kind of donations merit a tax deduction.

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