Tax Season Update! Colorado will not be accepting business or individual tax returns until February 15, 2024.

The rules of digital charity

The rise of online fundraising has made it easy for us to contribute to the causes we care about. And not only do we get to give to those in need, but we can also count our donations as tax write-offs, right? Well, not so fast. Contrary to popular belief, not all online charitable contributions can be claimed as tax write-offs. So, how do you know what’s tax deductible and what isn’t? Well, we’re here to help you figure that out.

The rise of digital charity

With the internet boom came the option for charities to go digital. And that’s made it easier than ever to support charitable causes. Crowdfunding platforms like GoFundMe, GoGetFunding and FundRazr provide an avenue for individuals and small businesses to create campaigns, share their stories and receive financial assistance. However, not all digital contributions are tax-deductible.

So, how do I know if something is tax-deductible?

While charitable giving is noble, small businesses and individuals must navigate the terrain of tax laws to determine what is eligible as a tax write-off. For the most part, for a donation to be tax-deductible, it must be made to a qualified 501(c)(3) nonprofit organization or a registered charity. You have to ask yourself: Does the person or organization I’m donating to have tax-exempt status? If the answer is no, your donation isn’t tax-deductible.

The tax-deductibility myth of GoFundMe

If you’re thinking, “Yes! I made a donation to this cause. Now I can use the tax write-off,” don’t get too excited—yet. While donating to any cause is something to feel good about (and a wonderful thing to do!), if the individual or organization receiving your donation doesn’t have tax-exempt status, your contribution isn’t tax-deductible. Most GoFundMe campaigns are created by people who don’t have that status. Don’t let that deter you from giving, though.

How do I find charitable organizations?

To make sure your contributions are tax-deductible, focus on organizations that are registered as a 501(c)(3) nonprofit. Nonprofit organizations don’t pass along earnings to private shareholders or individuals. They’ve gone through a stringent vetting process with the IRS and have been approved to receive tax-deductible donations. Before you donate, verify the organization’s tax-exempt status by checking the Tax Exempt Organization Search on the IRS website.

The importance of reading the fine print

Not all donations to a qualified nonprofit organization are equal (or tax-deductible). Some fundraising campaigns may offer rewards, like merchandise or services, in exchange for donations. When this happens, only the amount that exceeds the fair market value of the reward is an eligible tax write-off. Make sure you understand the details of the campaign so you know how much of your donation can be tax-deductible.

Save those receipts

When tax time rolls around and you’re ready to write off your donations, be sure you have the receipts to back up those claims. Keep receipts, bank statements or acknowledgment letters from the organizations you’re donating to, so you have the proof for tax purposes. If you happen to get audited and you don’t have the proper documentation to use as evidence, your tax write-offs can be disallowed.

When in doubt, seek help

Trying to navigate the maze of tax laws can be overwhelming. If you have questions or uncertainties about tax-deductible contributions or what can be written off, talk to a tax professional. They’ll provide guidance tailored to your specific situation and can make sure you have the information you need to continue making contributions to your favorite causes or charities.

Giving is a joyous act

The rise of digital charity has opened many new avenues for charitable giving, but it’s important to understand the rules of the game. If you want the tax write-off, be sure you direct your support to registered 501(c)(3) nonprofits—and read the fine print. Whatever cause you decide to support, remember that any contribution makes a difference.

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