Is money from crowdfunding taxable?

Your Guide to State, Local, Federal, Estate + International Taxation

Raising money through crowdfunding can be a great tool to fund your business, support charitable organizations or raise money for yourself. It is a great alternative to quickly get some cash compared to other funding methods, but how does this affect your tax liability?

Don’t miss: Proposed regulation creates exception to anti-clawback rule

Crowdfunding sites or its third-party payment processors will issue a 1099-K if during the calendar year the total of all payments distributed to a person or business exceeds $600 in gross payments, regardless of the number of transactions or donations.

Issuance of a Form 1099-K doesn’t automatically mean the reported amount is taxable to the recipient. Its taxability dependent on two main factors:

  • The organizer’s intent
  • Whether contributors received or will receive goods, services or an ownership interest in exchange for their contributions.

So, make sure you track and keep complete and accurate records. This means to document all transactions and all facts and circumstances surrounding the fundraising.

If you conclude the crowdfunding income is not taxable, it is not necessary to report this income in your tax return. But be aware the IRS may contact you requesting more information.

Determining whether crowdfunding income is taxable can be confusing. You can find additional information at IRS.gov. Contact your trusted Henry+Horne advisor for help guiding you through it.

Krisstel Hunt, CPA