tax tips — July 13, 2017

Can I Get a Tax Deduction for Donating to a Crowdfund Campaign?

by Susannah McQuitty

Crowdfund contributors wonder if they can get a tax deduction.

If you’ve ever made any large donations to a great cause, you’re probably aware that some charitable giving is tax deductible, meaning they can reduce your taxable income, and less taxable income equals either  a bigger refund or a smaller tax bill at the end of the year.

Sounds pretty sweet, huh? Here’s the important bit, though: Not all donations are tax deductible.

How do I know if my donation is tax deductible?

There’s a pretty simple way to tell if your contribution to a crowdfunding cause is tax deductible, and that boils down to whether the recipient is a 501(c)(3) organization.

Wait. A what now?

In order for your donation to be tax deductible, the IRS has to vet the charity to make sure it’s worthy of the tax breaks on contributions. Because of this, if the fund you’re contributing to isn’t for a qualified charity, your contributions are considered personal gifts instead of tax-exempt donations.

There are many worthwhile crowdfunding campaigns out there to help friends, family members and perfect strangers deal with medical expenses and other life challenges, but without the 501(c)(3) status, your contributions are still considered personal gifts.

Now, it is true that some campaigns are run by qualified charities looking for more ways to raise funds. Your campaign of choice may very well qualify you for a tax deduction.

A woman visiting a 501(c)(3)-certified charity.

How do I know if I donated to a Certified Charity campaign?

Some crowdfunding sites have clear identification for official charities. GoFundMe is one of these. Want to know if a campaign is tax deductible? Look for an official Certified Charity badge under the campaign organizer’s name. If there’s no badge, you can assume the campaign is a personal campaign.

Qualifying organizations on other sites, like KickStarter and IndieGoGo, won’t have an official badge but will clearly display their 501(c)(3) status on the project page. If you can’t find anything about an official status, contributions to that project are probably not tax deductible.

You can always check with the project creator to see if they have a qualifying charity status, or look them up on the IRS 501(c)(3) database. As a rule of thumb, though, crowdfunded projects without the qualified charity status displayed up front probably don’t qualify for a charitable donations tax deduction.

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