Whether you have to pay taxes on GoFundMe money depends on why you’re raising money.
Medical Bills and Other Personal Expenses
If you’re raising money for medical bills or other personal expenses and aren’t giving anything in return, that’s generally considered a tax-free gift.
As the receiver of a gift, you don’t have to pay any taxes on these gifts.
In some cases, donators who give very large amounts may need to file their own gift tax return.
If You Don’t Use All The Money
If you don’t use all of the money and the terms of your campaign don’t require you to give it back, it will still usually count as a tax-free gift to you.
If you choose to keep it, it’s still not taxable income as long as you got nothing in return. If you choose to donate it, you could even qualify for a donation tax deduction if you donate it to a qualified charity.
Starting a Business
If you’re starting a business, the money you receive through GoFundMe will usually be taxable. This applies to businesses ranging from trying to get your name out there as a solo musician to trying to launch the next big product featured on Shark Tank.
The difference here is that you’ll usually have to give something in return to get people to give you money. Even if you call what you receive donations and what you give a “free gift,” you’re really selling something in the eyes of the IRS.
You’ll probably need to file a Schedule C and pay income tax and self-employment tax on your sales. In some states, you may also need to collect sales tax.
In some cases, you may not have to pay taxes or may not owe as much if your gift is worth much less than the donations. For example, you give a $10 t-shirt for a $500 contribution. In that case, talk to a tax accountant about the best way to handle your taxes.
Fundraising for an Organization
If you’re fundraising for an organization, there are two important questions.
Are you giving anything in return?
If you’re not giving anything in return, you usually won’t have to pay taxes.
If you are giving something in return, it could count as selling things and be taxable income. In addition to income taxes, you should check if your state requires you to collect sales tax.
Are you a registered non-profit?
Even if you’re selling things, you may not have to pay income taxes if your group is a registered non-profit. Of course, you need to follow the usual rules like making sure the money goes to a qualified purpose.
Some states do require non-profits to collect sales tax on certain sales.
If you’re not a registered non-profit, your sales are likely taxable. If you don’t have a legally registered organization, the people organizing the sale may owe personal taxes.
For example, a ten-person sports team does a fundraiser for a European trip. The team isn’t a non-profit or any other legal entity. If each person got $1,000 from the sale, each person may have to report $1,000 on his or her personal tax return.
What if you get a 1099-K from GoFundMe?
GoFundMe doesn’t have a posted 1099 policy, but many users report getting a Form 1099-K from GoFundMe or a payment processor it uses such as PayPal.
Getting a 1099-K from GoFundMe does NOT mean that you have to pay taxes on what’s on your 1099. A 1099-K only means that you received $600 or more during the year.
If the money you raised is tax-free, you generally don’t need to report it. The IRS may send you a notice for unpaid taxes, but you just need to explain why you didn’t report that income.
If the money you raised is taxable, you may be eligible to claim business deductions so you don’t pay taxes on the full amount shown on the Form 1099-K.
If you used a personal account to collect money for a non-profit, gave the money to the non-profit, and got a 1099-K in your name, you have a little bit of a mess. Talk to a tax accountant about whether and how you can avoid having that income count as your personal income.
