The Council on Foundations reports that the IRS recently addressed whether donations made to crowdfunding sites are deductible to the donor: (Content originally provided in Washington Snapshot by the Council on Foundations, which graciously granted permission to re-publish here.)
“In 1917, the first charitable income tax deduction was enacted as part of a bill that raised federal tax rates to help finance WWI. The legislative history of the bill reveals Congress’s belief that increasing tax rates could chill charitable giving, thus the need for the charitable tax deduction.
Section 170 of the Internal Revenue Code allows an income tax deduction for contributions to corporations or associations “organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes…”. Simply put, this means organizations recognized by the IRS as §501(c)(3) public charities.
Recently, the IRS sought to clarify the deductibility of charitable contributions to fundraisers on Kickstarter-like websites, because these methods of fundraising are widely used today by organizations and individuals alike. The IRS clarified that a tax deduction may be available for certain contributions to personal fundraising websites like Gofundme.com. On June 16, an IRS official announced that donors to charities that fundraise through these websites could claim a deduction on their contribution, provided the donation is to a §501(c)(3) organization that has the discretion as to how to use the donation, and it is not earmarked toward a particular individual or family.”
More information about crowdfunding for nonprofits.