GoFundMe donations – tax considerations
Are GoFundMe donations tax deductible?
GoFundMe began to help individuals fund their financial needs. It became an easier way to ask others for help without asking them to their face. Plus, it is easy for anyone to share a GoFundMe campaign on social media with hundreds or thousands of people in seconds.
Unlike most donations, though GoFundMe donations typically are not tax-deductible, which takes many people by surprise.
What makes a donation tax deductible?
According to the IRS, for a donation to be tax-deductible, it has to be made to a qualified organization. It can include religious organizations, recognized charities, and educational organizations.
The organization must be a recognized 501 (c)(3), which means none of the money brings profit to the company or any individual shareholders. You can search the IRS database for registered 501 (c)(3)
Donations made, that do not qualify as charitable deductions or where goods in services were not received in exchange, would be categorized as gifts.
How to tell if your donation is tax deductible?
Since GoFundMe donations can go to an individual or a charity, you will have to differentiate between the two to determine if your donation is tax deductible.
The easiest way to tell is if the GoFundMe account is a Certified Charity campaign. If it is a standard campaign, the management of the funds is by individuals or a group of individuals. If this is the case, the individuals can withdraw funds as they need and deposit them in their personal accounts. This type of Gofundme donation does not qualify you for a tax deduction.
If the campaign is for a charity, you can deduct the donation like any other charitable contribution. The money collected does not go directly to the organizer. Instead, the money goes directly to the charity via the PayPal giving fund.
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 (or may not) 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.
Before organizing any online fundraiser, it is best to learn about potential tax consequences both to you as the organizer and to those who donate to your campaign. It’s important to conduct strategic tax planning prior to making a gofundme donation. If you have questions beyond the information provided by the platform (https://www.gofundme.com/) you want to use, seek advice from a tax professional.