GoFundMe is an online platform that lets anyone set up a website to raise money to pay for a family member’s cancer treatments, college tuition payments, a new church building — almost anything you can imagine. Anyone who donates through the platform can obtain an official-looking receipt that can be used for tax purposes. But the real question is whether any donations made through the site is eligible for the charitable deduction. The short answer is “no.”
The government has very strict standards for organizations that can accept tax-deductible donations — known as 501(c)(3) organizations, from the section of the Internal Revenue Code that governs them. Setting one up and following the rules is a complicated process. Chances are someone raising money to finish their MFA in weaving hasn’t gone through that process.
That doesn’t mean the causes on GoFundMe aren’t legitimate, although you should check the bona fides of any online charitable requests. So if you want to send $100 to help an amateur athlete attend the national curling championships, that’s perfectly legal. But you can’t deduct that $100 except in the unlikely event the athlete has created a 501(c)(3) organization for that purpose.
Of course, some legitimate 501(c)(3) organizations may be using GoFundMe as a fundraising outlet, and in that case your donations through the platform will be deductible. But it’s your responsibility to check that out.
If you are unsure about the status of any entity, ask for proof that it is a 501(c)(3) organization. You should also be able to look organizations up in the GuideStar directory. Also remember, not every nonprofit organization qualifies as a 501(c)(3) entity and can accept deductible donations.
Finally, what if you have set up a GoFundMe account to raise money for a cause and are not an official nonprofit organization — are you on the hook for income tax on what you have received? It’s possible all the donations you received are simply gifts and thus tax-free income, but that’s not always the case. It can get complicated. Be sure to consult a tax professional.
To learn more about how our firm can serve your nonprofit organization, don’t hesitate to contact Kathy Corcoran at (302) 254-8240.
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