Is GoFundMe Donation Tax Deductible and What You Need to Know

GoFundMe donations can be a lifesaver for those in need, but are they tax deductible? The answer is not a simple yes or no. In the US, donations to GoFundMe campaigns are considered charitable contributions, but there are specific rules and requirements to follow.

You can only deduct GoFundMe donations on your tax return if the campaign is registered as a 501(c)(3) organization with the IRS, which means it's a recognized charitable organization. Unfortunately, most GoFundMe campaigns don't meet this requirement.

The IRS doesn't consider GoFundMe donations to be tax deductible because they're not made to a qualified charitable organization. However, some GoFundMe campaigns may be set up by a registered 501(c)(3) organization, making the donations tax deductible.

Tax deductions for donations can be a bit tricky, but don't worry, I've got the lowdown.

To qualify as a tax-deductible donation, your contribution must meet four specific criteria outlined by the ATO.

The good news is that crowdfunding donations can be tax-deductible if they meet the usual requirements. However, donations made to support an individual through a crowdfunding campaign usually aren't tax-deductible unless they meet these requirements.

To avoid any issues, keep track of your donations and time them right to maximize your deductions.

The limit on how much you can deduct each year is 60% of your adjusted gross income (AGI), or a one-time 100% of AGI in 2020 for qualified charities.

If you hit the cap each year, the excess deduction carries over to the next year to offset future income subject to the limits in place for that year.

When making contributions to organizations that deliver something to you in return, be sure to reduce your contribution by the value of what you received in return for your contribution.

For example, if you donate $100 to a nonprofit school and receive a $20 gift in return, you can only deduct $80.

Here's a quick rundown of how to calculate your deduction:

Crowdfunding donations may or may not be tax deductible, depending on the charitable contribution.

To qualify as a tax deduction, crowdfunding donations must meet the usual requirements, which generally include supporting a qualified charitable organization.

Donations to nonprofits are usually tax deductible, with the IRS allowing up to 50% of your adjusted gross income (AGI) in deductions, although 20% and 30% limits sometimes apply.

The 50% limitation is suspended for 2020 and 2021, allowing individuals to donate up to 100% of their AGI.

Personal donations, such as direct contributions to individuals, are likely not tax deductible.

To claim any possible deduction, itemize deductions on your tax return using Schedule A (Form 1040).

The following types of donations are typically not deductible:

Donations to individuals, such as helping someone with medical bills or some other personal need, are generally considered personal gifts subject to gift tax rules.

Expand your knowledge: Personal and Business Taxes

Charitable Contributions are donations or gifts made to qualifying organizations for the purpose of helping others. They are voluntary in nature and made without getting, or expecting to get, anything of equal value in return.

To qualify for a tax deduction, the organization receiving the donation must be a registered charity or 501(c)(3) non-profit organization. You can check if an organization is qualified on the IRS Exempt Organizations Select Check website.

Charitable contributions can be made in the form of cash or goods, but services aren't eligible for a tax deduction. The IRS provides a list of qualified organizations, including state or local governments, community chests, and war veterans' organizations.

Here are some examples of qualified organizations:

If you're unsure whether a group is approved by the IRS to receive tax-deductible donations, check online at IRS Exempt Organizations Select Check.

To claim a tax deduction for a GoFundMe donation, you'll need to keep proper records of your contribution. This means obtaining a receipt from the DGR (Deductible Gift Recipient) using the third-party site, not from GoFundMe itself.

You should also keep your receipts for five years, as recommended by the ATO. This is a necessary practice even if you do your own tax return and lodgement.

If you're donating via credit card, you can claim the write-off in the same year the charge is processed. However, if you fail to pay your bill before credit card interest is assessed, you can't deduct those interest charges as part of your initial charitable contribution.

A different take: Tax Deferred Contribution

To meet the conditions for a tax-deductible donation, you need to ensure that the donation is made to a Deductible Gift Recipient (DGR). This is crucial, as any non-compliance could result in forfeiting your right to claim the donation as a deduction.

The ATO outlines four criteria for determining tax-deductible donations, but the key takeaway is that the donation must be made to a DGR. This is where things can get tricky, so it's essential to double-check that the charity you're donating to is a registered DGR.

If you're unsure whether a charity is a DGR, it's always best to verify this information before making a donation. You can check the charity's website or contact them directly to confirm their status.

Here are some exceptions to the rules: you may not need a receipt for donations of up to $10, and you can use bank statements as proof of a donation. However, it's still a good idea to ask for a receipt, especially if you're making a cash donation.

In some cases, you may be given a small item in exchange for your donation, such as a pen or rubber wristband. As long as the donation itself is $2 or more, you can still claim a tax deduction.

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Keeping receipts is crucial when it comes to claiming tax deductions for donations. You'll need proper records to substantiate your contributions.

To claim a cash contribution, you'll need documentation like a canceled check, bank or credit union statement, credit card statement, or a receipt from the qualified organization. This includes a scanned image of both sides of a canceled check obtained from a bank or credit union website.

For noncash contributions, the IRS provides various rules depending on the amount of the contribution. If you give $250 or more in cash contributions, you should ask for a written acknowledgment from the qualified organization to substantiate your contribution.

Keep in mind that if you claim expenses related to the use of a car in the service of donating your services to a qualified organization, you must keep reliable written records of your expenses or properly track the miles driven if opting to use the flat $0.14 per mile deduction rate.

Related reading: Tax on Cash Withdrawal

Here are the different substantiation requirements you can use depending on the type of contribution being made:

In some cases, you may not need a receipt of your donation to claim it as a deduction. For example, bucket donations of up to $10 can be claimed without a receipt. However, it's always a good practice to keep receipts, especially for cash donations.