While they may seem like a new phenomenon, fundraising tools, such as GoFundMe, Kickstarter, and Indiegogo, have been around for a very long time.
Online fundraising is loosely linked to a concept called “crowdfunding,” which can be traced back to early-1700s Ireland. At that time, small loans were extended to rural families who had no collateral. What’s different is that today’s online tools take advantage of new technology and a social sharing mindset to make crowdfunding feel like something new and novel in a digital world.1
More than likely, you’ve been asked to participate in an online fundraising event during the past year. For example, you may have been approached by neighborhood kids or family members looking to raise money for a baseball team or a school event. Or in more serious situations, you may have been asked for donations to help manage medical expenses or other dire family situations.
Fun Fact: The most common donation to GoFundMe is $50.2
The Federal Trade Commission has responded to the growth of digital fundraisers by creating a variety of resources to help guide people who are considering making a donation. Here’s a quick summary of what the FTC calls “things to know.”3
The campaign organizer sets the goal of the crowdfunding campaign. The goal can be to help a person, family, or a larger group of people. Sometimes, the platform can be used to raise money for a business purpose, such as developing a new product. The campaign organizer can also set the dollar amount of the fundraising goal.
There are many crowdfunding platforms, and each has its own set of rules. It may go without saying, but GoFundMe’s rules are different then Kickstarter’s. For example, the platform determines how much it will keep in fees and when the funds will be distributed to the campaign organizer.
The money raised goes to the campaign organizer. The money does not go directly to the people or cause that the campaign was set up to help. It goes to the organizer, who is accountable for delivering on the campaign’s promise.
Are donations tax deductible? Only donations to organizations that are registered with the IRS as a charity might be eligible for a tax deduction. Sometimes charities will set up campaigns, but they can also be set up by others.
The next time you are asked to participate in a digital fundraising campaign, keep in mind some of these pointers from the FTC. And remember: We’re not tax experts, but we are associated with companies that are. If you want to learn more about the tax status of a contribution, we encourage you to speak with your tax professional or ask our tax planning department. They might be able to help.
- Fundable.com, 2024
- Philanthropy.com, February 6, 2024
- Consumer.FTC.com, 2024
