Are GoFundMe Donations Tax Deductible? Tax Secrets to Know
If you’ve ever donated to or received funds from a GoFundMe campaign, you may be wondering: are GoFundMe donations tax deductible? This is an excellent question that many people have. With GoFundMe’s popularity for crowdfunding all types of causes, both donors and beneficiaries should understand the potential tax implications.
This guide is going to walk you through the tax rules governing the tax deductibility of crowfunding campaigns you need to know. By the end, you’ll have clarity on how donations may or may not affect your taxes, both as a giver and receiver of crowdfunding campaign funds.
The key to tax deductible donations
First, let’s cover the basics. For your GoFundMe donations to be tax deductible, the campaign must be run by a certified 501(c)(3) nonprofit organization. If you donate to a personal gofundme fundraiser, you likely won’t qualify for a deduction.
However, even if you give to a qualified charity campaign, whether you can actually deduct charitable contributions from your taxes depends on if you itemize your deduction.
Itemizing allows you to deduct qualifying expenses, like charitable donations, mortgage interest, medical bills, and more. But itemizing only makes financial sense if all your deductions exceed the standard deduction for your filing status.
Tax benefits of giving to GoFundMe campaigns
Now that we’ve covered the itemizing caveat, let’s clarify when GoFundMe donations can actually reduce your tax bill.
In short, if you itemize, you may deduct contributions made to qualified IRS-approved 501(c)(3) public charities raising funds through GoFundMe. These deductions on your tax return can lower your tax liability.
The platform has two main avenues for tax-deductible giving:
Certified charity fundraisers
Any fundraiser labeled as “certified charity” is managed by GoFundMe’s charity partner, PayPal Giving Fund, a 501(c)(3) public charity.
When you donate to one of these guaranteed tax-deductible fundraisers, you’ll automatically receive a donation receipt for your records.
GoFundMe causes
GoFundMe causes allows you to directly contribute to established 501(c)(3) nonprofit organizations and their specific verified fundraisers. These range across themes like health, community service, animals, and more.
Again, as an itemizing donor you receive documentation to write these cause donations off your taxes.
In both options, the fundraiser page clearly states it’s for a certified IRS-approved charity, ensuring your donation’s deductibility.
Common tax deductible GoFundMe campaign examples:
- Donating to the American Red Cross Hurricane Relief Fund
- Contributing towards a local no-kill animal shelter’s veterinary expenses
- Giving to a verified fundraiser for St. Jude’s Children’s Hospital
When GoFundMe donations are not tax deductible
In contrast to registered charities’ fundraisers, most of the personal campaigns you see on the platform aren’t tax deductible.
These include some of the most popular uses for the platform, like:
- Fundraisers to cover one person’s critical medical bills, funeral costs, disaster relief, etc.
- Campaigns for individuals facing life hardships, losses
- Crowdfunding for small businesses or entrepreneurs
The common thread? The recipient is a single person or family rather than an approved charitable organization.
While these personal causes pull at our heartstrings, donations technically count as personal “gifts of kindness.” Unfortunately, you usually can’t write off gifts on your taxes even if the individual cause seems charitable.
No 501(c)(3) = No Deduction
The key takeaway is that the recipient must be a registered 501(c)(3) for tax benefits. And with 90%+ of GoFundMe users starting personal-benefit campaigns, most donations won’t qualify.
If you still want to give despite this, focusing on the actual impact should give enough reward beyond taxes. Your personal gift, even if not deductible, makes a tangible difference for real people in need.
For large GoFundMe donors specifically seeking deductions, however, giving strictly to eligible charity campaigns is key.
Ok, but what about gift tax?
If you’ve given substantial personal gifts via GoFundMe, another question may arise: do you owe federal gift tax?
Luckily, you most likely don’t have to worry about this extra liability.
How the gift exclusion keeps your taxes simple
Every year, the IRS lets you give up to the gift exclusion limit ($16,000 in 2022 and $18,000 in 2024) to as many separate individuals as you want, 100% tax-free.
Even above that, up to nearly $12 million in your lifetime is excluded before owing actual gift taxes. And even past that 12 mil, all you need to do is report the gifts by filing a gift tax return – your recipient still pays zero extra taxes.
So while deductibility has limits, you can actually gift limitless amounts without your recipient owing income tax or you yourself owing gift tax. The Internal Revenue Service wants to encourage generosity!
The only exception is if donors receive “valuable consideration” – something of value in return – from a gift recipient. This usually only applies to small business crowdfunding rewards, not personal medical, funeral, or emergency relief campaigns. Consult with a tax professional if you offered any donor rewards or had employer donations.
Do GoFundMe beneficiaries pay taxes on the money received?
If you’re on the receiving end of a campaign rather than donating to one, you also usually don’t have to worry about taxes. The general rule is:
Funds received from a GoFundMe considered personal gifts to you aren’t taxable income. So medical bill relief, funeral expenses, emergency funds, and most crowdfunded tuition are all tax-free money in your pocket.
Like the above gift tax explanation, the IRS essentially wants to help those relying on support from others to get through hardship. Taxing relief money sounds too heartless even for Uncle Sam!
When is GoFundMe money tax deductible?
While the standard is tax-free money received, there are two main situations where GoFundMe donations are considered taxable income:
- Business Crowdfunding Rewards – If you use GoFundMe to raise money for a business, nonprofit, or other commercial venture, you may offer “perks” to donors. Examples are workshops, merchandise, subscription box access, or events. Any contribution where the giver receives something of commercial value is subject to tax. You must report funds received from these donation tiers as business or commercial fundraising income.
- Employer Contributions – Rarely, an employer may donate to an employee’s GoFundMe, like contributing to an ailing coworker’s medical campaign. IRS rules require counting any benefits your company provides, including crowdfunding donations, as taxable income. The logic is that employer gifts still help pay your personal expenses.
Outside those two cases, though, beneficiary tax bills are very rare. Users raise over $5 billion on GoFundMe annually, and the platform confirms funds received are usually nontaxable.
How to handle GoFundMe donations tax reporting
If you do receive over $600 total through PayPal, GoFundMe’s payment processor, you may get an automatic IRS 1099-K form reporting your “income.”
But this doesn’t automatically mean you have taxable income or that you must pay taxes. As explained above, most cases don’t lead to actual tax liability for recipients.
Definitely save all records of any amounts received and the campaign details, though. If the IRS flags your 1099-K and requests you verify why the funds were nontaxable, you’ll want documentation to prove your position. An accountant can also help explain how to correctly handle 1099-K’s from GoFundMe or other third-party apps.
Who pays taxes on GoFundMe campaigns?
As a recipient:
- Personal relief money is generally tax-free
- Business rewards result in taxable income
- Employer gifts also count towards taxable income
As a donor:
- Only certified charity campaigns allow tax deductions
- No taxes owed on personal gifts given even in high amounts
Following these rules lets both donors and recipients avoid any shocking tax consequences from their participation.
Are GoFundMe donations tax deductible - Important tax tips
The deductibility of donations made to a crowdfunding platform when you file your taxes depends on various factors such as tax law, adjusted gross income, and individual tax situations. To maximize the tax benefits of donating to charity, it is important to understand the tax rules surrounding the deductibility of charitable donations. Whether you donate or benefit, working with a tax professional or a 报税员 is valuable when participating in a campaign with major financial implications.
They translate rules into plain English and easy action steps tailored for your individual tax situation.
Ultimately taxes shouldn’t deter generosity on either end. But getting personalized tax guidance lets you give even more by maximizing deductions. And recipients can rest easier knowing specialist input protects them from potential IRS issues.
So use this article as a starting guide on GoFundMe donations taxes, but don’t hesitate to bring in an expert! Their job is making sure your good deed doesn’t go punished by unclear regulations.
