To determine if a gift on a crowdfunding site (like GoFundMe) has taxable or deductible consequences, the organizer’s intent and situation must be considered.

  • Donations made to campaigns like individual life events or medical bills, with no resemblance to business activities, are considered personal gifts and not taxed as income to the recipient, nor are they tax deductible for the donor. Donations must be used for the cause listed on the fundraiser, and donee’s cannot give anything to the donor in exchange for the contribution.  If the crowdfunding site issues a Form 1099-K, which is likely if the sum of transactions exceeds 200 and of the total value exceeds $20,000, the recipient should report the proceeds as “Other Income” and then show a reduction of that amount with explanation.
  • Other GoFundMe campaigns can be for registered nonprofit organizations. In these cases, the certified charity’s name and EIN must be listed and the cause not intended to benefit specific individuals.  These donations are considered tax-deductible to the donor; current charitable deduction rules apply.
  • Some businesses organize crowdfunding campaigns to start a business or to keep it afloat. The business owner must report donations as business income, but the donor cannot claim the deduction.
  • A generous donation by a single donor to one of these campaigns not qualifying as a charitable deduction may be subject to gift tax rules if it’s more than $15,000.

Killingsworth Spencer’s advice: keep good records; any dispute with the IRS puts the burden of proof on the taxpayer.  As with many tax situations, determining how to handle specific circumstances can be complex; when you’re in the need of sound expertise, call our office at (770) 552-8286 to set up an appointment with one of our tax professionals.