Do You Have to Pay Taxes on Money Obtained via Crowdfunding?

People are now using crowdfunding for a number of different reasons. Crowdfunding is used for everything from getting new inventions on the market to getting money donations to go on vacation. Here are the tax rules which govern taxes on money raised via crowdfunding avenues.

Government Lags Behind

The government is not yet up to speed on dealing with crowdfunding income. There have been no new laws via the federal government on money collected through donation. What this means is that money should be treated like gifts or income depending on your specific crowdfunding campaign.

Gift Income

If you held a campaign to help pay for something such as medical expenses or a family vacation, the money is not typically considered taxable. Money that is meant to be a gift is only taxed to the giver when it reaches $14,000 per year. For campaigns that ask for gift donations, you are most likely in the clear.

Starting a Business

If you are a part of a Kickstarter campaign that is asking for donations in order to start a business and you are not offering equity to the donators, this is considered taxable income in the form of capital equity. This will need to be reported on your taxes and you will need to pay taxes on all of the money you receive. If you are offering equity to each person that donates, you will not incur this expense. Be sure to keep track of each donation and what is offered to determine your tax responsibilities for each campaign that you run.

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