Tax Implications for GoFundMe Organizers

Individuals who use popular donation platforms to solicit donations for personal or business-related causes need to know if GoFundMe is taxable to declare these amounts accurately. In the eyes of the IRS, fundraising campaigns are subject to different tax treatment depending on the recipient and the final use of the funds.

It’s always wise to consult a tax professional to clarify when funds are considered taxable income and how to navigate the relevant tax regulations. This allows you to optimize the impact of your campaigns while staying compliant with tax law.

Are GoFundMe Fundraising Campaigns Taxable?

Funds raised through GoFundMe campaigns are sometimes taxable depending on the nature of the campaign. Generally, funds raised for personal causes like paying for a medical bill or financing an educational goal are considered a gift and therefore not subject to tax. Funds raised through crowdfunding campaigns to be used for business purposes are likely subject to income tax. 

Income Tax Consequences of Crowdfunding

The income tax consequences of GoFundMe donations depend on the nature of your campaign. The best way to understand the implications of setting up a campaign and receiving funds is to consult a trusted professional in tax preparation services like our teams in Jacksonville, Florida, and Spartanburg, South Carolina. An expert will give advice on how to treat funds received from crowdfunding campaigns and help you plan proactively to minimize the recipient’s tax liability on the amount received.

Raising Money for Someone in Need (Other than an Employee)

GoFundMe donation amounts are considered “gifts” by the IRS if they are made through "detached and disinterested generosity" and without the prospect of receiving anything in return. As gifts, these amounts are excluded from the recipient’s gross income by law. 

Raising Money for an Employee

A GoFundMe campaign set up to help an employee may be subject to income tax for the recipient as cash gifts given to employees are considered taxable compensation. Consult a tax professional to ascertain the best way to help the employee in question while minimizing their tax liability.

Raising Money for a Business Venture

Campaigns aimed at raising funds for business purposes will likely face different tax implications compared to individual campaigns. In this case, it’s best to get help from experts in tax planning services in order to set up your crowdfunding campaign for the most favorable result. Look for professionals who offer personalized strategies that optimize your tax situation and maximize the impact of your crowdfunding campaign. 

Getting professional assistance will also help you keep complete and accurate records of all the circumstances surrounding fundraising and the use of funds. You must keep these records for at least three years.

Are Donations to a GoFundMe Campaign Tax Deductible?

Individuals and corporations may wonder if contributing to a GoFundMe campaign will earn them a tax deduction. The answer to this is usually no. This is because the IRS sets out very clear and strict rules regarding what type of charitable donations merit a tax deduction.

Which Charitable Donations Are Tax Deductible?

The IRS only allows tax deductions for donations made to qualified 501(c)3 tax-exempt organizations. Some crowdfunding platforms including GoFundMe offer a separate landing page for campaigns run by eligible charitable organizations to help donors distinguish between personal campaigns and official fundraisers run by 501(c)3 organizations. You can also check on the IRS Tax Exempt Organization Search tool to identify eligible organizations for tax-deductible donations.

Am I Liable to Pay Gift Tax on GoFundMe Donations?

Donors who pledge over $18,000 (or $36,000 if filing jointly) to a personal GoFundMe campaign (not run by a qualifying tax-exempt charity) may be required to file a federal gift tax return. The good news is that you're unlikely to end up paying gift taxes, but you must report your generosity to the IRS nonetheless.

Which Tax Documents Must I File? 

The organizers of successful campaigns that raised more than $600 in gross payments will likely receive Form 1099-K from the fundraising platform they used. This document will set out how much the campaign made. Be aware that the IRS also receives a copy of the same form, so make sure you keep sound records and receipts and report your income when the time comes! 

Receiving Form 1099-K doesn’t mean you’ll pay tax. However, it’s important to report your campaign funds to prevent your case from being flagged by the IRS.

Nonprofit organizations that fundraise via GoFundMe will file Form 990, which is the nonprofit equivalent of a personal tax return.

Consult a Tax Professional before Launching Your Campaign

Navigating the tax implications of GoFundMe campaigns is generally straightforward, but understanding the fundamental principles is essential. Donations received as gifts are generally not taxable to the recipient. However, funds used for business purposes are subject to different rules.

Careful record-keeping, clear communication about the campaign's purpose, and consultation with a qualified tax professional are crucial steps in a successful GoFundMe campaign. These steps will ensure compliance with tax regulations and allow you to focus on your cause.