Kickstarter and GoFundMe Taxes
We’ve already established that money you earn from streaming counts as income for US income taxes. That holds true whether it’s a tip, donation, or a sub from any platform.
So what about other sources of money? Sometimes when things go wrong, especially costly medical emergencies, we turn to GoFundMe. Also, if there’s a specific project you want to get off the ground Kickstarter can make sense.
GoFundMe
GoFundMe is the easier case to talk about. Since with GoFundMe you’re asking people to donate money for a one-time thing they’re generally considered gifts. Gifts are not taxable to the recipient in the US.
If you’re giving money on GoFundMe and it’s to a registered charity (under US tax code section 501(c)(3)) then you may be able to deduct it. This is the same deduction you’d get for donations to charities outside of GoFundMe so you’d have to be itemizing your deduction. GoFundMe marks “certified campaigns” that would qualify and you should receive a form from your payment processor with the details.
It’s possible that if you give a lot of money to someone on Kickstarter you theoretically could owe taxes on it eventually. I wouldn’t worry about it because you’d have to give away so much money over your lifetime that the odds of it applying to you are near zero.
Kickstarter
This one’s a little more complex but not too bad. With Kickstarter, you’re usually funding a project. This pushes it out of the territory of “personal gift” and more into the funding a business territory. Therefore, money you get from Kickstarter is generally considered taxable income to you.
There’s good news is that if you’re running a business. If you follow some of the best practices we’ve talked about in other articles you should be able to deduct business expenses against this income. That should be a normal part of your accounting process. Basically, if you raise a bunch of money and spend it all on developing the thing you promised via Kickstarter then you may have a neutral tax impact.
Best Practices
Keep your records for money you give or receive from either platform! While the guidelines in this article hold generally true you want to be able to back up your assertion if you’re audited. You’ll also want to do this so you have a good sense of how the business is doing. After all, without good data on what you spent and earned you’ll not know if you are making or losing money.
If you’re raising money on Kickstarter, consider incorporating. This means forming an official business. You may want to do this because it will help with your record keeping and make it obvious to the IRS that you’re intending to run your project as a business. This gives you the benefit of deducting your expenses against business income, which is a huge tax savings. It also could help with separating your personal and business income which makes your life easier come tax time.
Consider the why on the money you’re raising. If it’s for a project then consider Kickstarter so you don’t get yourself into a bad tax situation. If it’s for personal expenses that you need help with, GoFundMe can make more sense.
Finally, have a clear plan for the money once you raise it. You don’t want to get a bunch of money and then have no idea for it, since that’ll really make you look bad to those who donated. That can be a worse outcome than not having the funding in the first place if you make your living on the good graces of your community! In case you missed my heavy handed point, that’s exactly the world you live in as a streamer.
Conclusion
A rough rule of thumb is that GoFundMe money is not taxed and Kickstarter money is taxed. There’s some wiggle room in there, for sure, but most of the time you can use that heuristic. If you are going to one of these sites for funding you should really consider what it is you’re trying to accomplish and have a clear plan beforehand.
You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here. I’m not a lawyer or accountant but my job is to find these kinds of opportunities and connect you with the people who can do the calculation work.
