By Kari Jolly, Tax Senior Associate | Not-for-Profit Team
Are crowdsourced fundraising donations tax deductible?
If you have a social media account, be it Twitter, Facebook, or any other of the myriad of platforms out there, you have no doubt seen a GoFundMe request come across your feed. GoFundMe is a for-profit firm offering a crowdsourced fundraising platform for most anyone with a cause who wants to raise money. Often, these causes are for someone or something in the community and pull at one’s heartstrings. We want to help the child down the street raise money to join the travel baseball team; or, Suzy, the colleague, who needs help to fund Fido’s canine chemotherapy. With a credit card and a few clicks, one’s donation, less the GoFundMe fee, is in Suzy’s hands and Fido is (hopefully) off to the vet.
Tax time rolls around and the question arises – is a donation to a charitable cause through GoFundMe or similar platforms deductible? The Internal Revenue Code provides that charitable contributions (subject to certain limitations not discussed here) made to a “qualified charity” as defined by IRC section 170(c) may be used to reduce a donor’s taxable income. GoFundMe is a for-profit organization offering a vehicle for moving money from one person to another. GoFundMe does not vet individual fundraisers to determine whether they are operating a “qualified charity,” nor does it provide donors with the tax receipt they need to document the transaction. Regardless of charitable intent, donations made to individuals or non-qualified groups through the GoFundMe platform are considered “gifts” which, depending on how large they are, may be taxable to the donor.
Crowdsourced Fundraising for Not-for-Profit Organizations
GoFundMe Charity is a separate arm of the organization that provides certified charitable organizations with crowdsourced fundraising resources. Donations made to 501(c)(3) organizations through GoFundMe Charity are deductible contributions, so be sure to include record of those transactions with your tax information. The Internal Revenue Service (IRS) offers the public an Exempt Organization Search tool to identify qualified tax-exempt organizations. One should check this resource before donating, if the donation is intended to be recognized by the IRS as a charitable contribution.
Crowdsourced fundraising looks to be a part of our world for the foreseeable future. Donors are advised to use caution and do some research before donating through such platforms. As always, please consult your Keiter Opportunity Advisor for guidance tailored to your individual needs or Email | Call: 804.747.0000. We are here to help.
Additional Resources for Virginia’s Not-for-Profit Organizations
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.