What You Need to Know about Crowdfunding and Taxes

What You Need to Know about Crowdfunding and Taxes

10/5/2022 Tags: Announcements, In the News

You’ve probably seen or donated through a crowdfunding platform — like Kickstarter or GoFundMe — for someone’s medical bills, emergency needs, or business ideas.

But is the money raised through crowdfunding considered taxable income?

So, let’s back up a second. A taxpayer’s gross income includes income from all sources unless the law specifically excludes the income. So, for example, if you receive a gift, it’s not usually considered gross income.

Here’s an overview of what the IRS says about crowdfunding:

  • If you’re raising money on someone else’s behalf, you don’t have to include those dollars on your gross income as long as you give the money to the person you organized the campaign for.
  • If you donate to a crowdfunding campaign without expecting anything in return, that donation is a gift. As such, it’s not included as gross income for the person the campaign was for.
  • If an employer gives to an employee’s crowdfunding campaign, that’s usually considered gross income for the employee.

Crowdfunding sites are required to file a Form 1099-K, Payment Card, and Third-Party Network Transactions when:

  • The amount raised was more than $600, or
  • People donating to the crowdfunding campaign receive goods or services for their contributions.

If you’re thinking about organizing a crowdfunding campaign — whether for business or personal reasons — make sure you keep good records. The IRS has information about what kinds of records you should keep and for how long.

If you have questions about crowdfunding, let us know.

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