Do I Have to Pay Taxes On My Crowdfunded Campaign?tax tips | July 06, 2017 | By Susannah McQuitty
Kickstarter, GoFundMe, Indie GoGo – crowdfunding has become incredibly popular, but does anyone know if you have to pay taxes on the money you make through crowdfunding websites? Well, you may have to pay taxes on your campaign, but in some cases, you actually don’t.
So how do you tell the difference?
You don’t have to pay taxes on a crowdfunded campaign if your contributors didn’t receive anything from you in return.
The most foolproof way to tell whether your crowdfunded money is taxable is to simply ask, “Why are people sending money?”
If your contributors are giving money as a donation and don’t expect to get anything from you as a reward, their contributions are considered a gift and aren’t taxable.
You don’t have to pay taxes on a crowdfunded campaign if contributors are buying stock or equity in your startup.
If your contributors are giving money to buy equity in your startup, they are making an investment and not actually paying you as an individual. Since they’re tying themselves to the startup, not lining your pockets, their contributions are non-taxable.
You do have to pay taxes on a crowdfunded campaign if contributors are rewarded for certain contribution amounts.
If your contributors are sending money and being rewarded with items like t-shirts, pre-ordered products or other things with monetary value, the minimum amount required for the reward counts as taxable income.
Here’s an example: Say you offer a t-shirt if a contributor sends $30. You will have to pay tax on the $30, since the contributor gave you money and you gave a product in return.
Now, if a contributor gives more than $30, you still only have to pay tax on the $30. Contributing anything more than the minimum amount for the product is a choice of the contributor, so the excess counts as a gift. For example, if a contributor sent $50, you’ll pay taxes on the $30 and none on the remaining $20.
And that’s it!
Let us know in the comments below if you have any questions on doing taxes for your crowdfunded campaign that we didn’t get to here.