IRS warns that some crowdfunding money may be taxable to the recipient

IRS LogoFrom the IRS: Crowdfunding is a popular way to raise money online. People often use crowdfunding to fundraise for a business, for charity, or for gifts. It’s important to know that money raised through crowdfunding may be taxable.

Highlights from the IRS Tax Tip

  • If a crowdfunding organizer is raising money on behalf of others, the money may not be included in the organizer’s gross income, as long as the organizer gives the money to the person for whom they organized the crowdfunding campaign.
  • If people donate to a crowdfunding campaign out of generosity and without expecting anything in return, the donations are gifts. Therefore, they will not be included in the gross income of the person for whom the campaign was organized.
  • However, not all contributions to crowdfunding campaigns are gifts and may be taxable.
  • When employers give to crowdfunding campaigns for an employee, those contributions are generally included in the employee’s gross income.

Read the full IRS Tax Tip . . .

Our added tips

Obtain the advice of an experienced and capable tax advisor about crowdfunding questions, especially of you’re the organizer, an employer donor or the recipient.

Don’t assume you’ll receive a charitable deduction for donating to a crowdfunding campaign, especially a campaign to help a specific individual.