Crowdfunding campaigns such as GoFundMe have become increasingly common ways for individuals and communities to support those facing financial hardship. While these fundraising efforts reflect a spirit of generosity, it is important for donors to understand how such contributions are treated for tax purposes. Each year, we receive questions from clients about whether these donations qualify for a charitable deduction, and the answer is often more complex than expected.
Before you click the donate button, it helps to understand how the IRS views your crowdfunding contributions.
The Golden Rule: Look for the 501(c)(3)
To receive a tax deduction for your generosity, your donation must go to a qualified, tax-exempt organization. The IRS refers to these as 501(c)(3) organizations. This classification includes registered public charities, religious institutions, and educational groups.
If the platform or the campaign organizer does not clearly state that the funds go to a registered 501(c)(3), you should assume the donation is not tax deductible.
Smart Ways to Give
You can still support the causes you care about while receiving a tax benefit. Here are a few practical ways to ensure your donations count during tax time:
- Understand personal causes vs. charity campaigns: Generally, you cannot deduct most GoFundMe donations because the IRS considers them personal gifts. Donations made directly to individuals, families, or specific people for medical and personal expenses are not charitable contributions. Only donations made to properly registered 501(c)(3) charities via crowdfunding platforms are tax-deductible, and typically you must itemize your deductions to claim them.
- Verify their status: Before you make a donation, check the fundraiser page to see if it is explicitly labeled as a “Certified Nonprofit Fundraiser.” You can also ask the organization for their tax-exempt letter or use the Tax-Exempt Organization Search tool on the IRS website to quickly confirm a charity’s standing.
- Maintain proper documentation: For any charitable donation over $250, the IRS requires you to keep a written acknowledgment or receipt. When you donate to a verified charity through GoFundMe, the platform (via PayPal Giving Fund) or the charity itself will provide the necessary documentation. Keep this receipt for your tax records.
- Find a corresponding charity: Instead of giving directly to an individual facing a medical crisis, you can donate to a registered charity that researches that specific illness or provides grants to patients. This ensures your funds help those in need while preserving your tax deduction.
Giving back to your community makes a powerful impact, and we want to help you maximize the financial benefits of your generosity. If you need help planning your charitable giving strategy for the year, please reach out to our team.
For more information, please contact a team member at Saville CPAs & Advisors today to discuss your tax planning and charitable goals.