Do businesses need to pay taxes on GoFundMe campaigns when buying equipment with no rewards offered?

So I run a small bakery and we've been trying to save up for a new industrial mixer for the past year but it's taking forever. One of my regular customers suggested we start a GoFundMe to help raise the funds. The mixer costs about $12,000 and we're nowhere close to that yet with our savings. I want to be clear that we won't be offering any free goods, discounts, or anything in return for people contributing. It would just be folks supporting our small business because they like us. But I'm worried about the tax implications. Would we have to pay income tax on whatever money we raise through the GoFundMe? Or is it considered some kind of gift? Anyone know how this works for a business (LLC) as opposed to an individual?

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19 comments

Zoe Stavros

•8M

This is an important distinction from personal GoFundMe campaigns. For businesses, crowdfunding campaigns like GoFundMe are generally considered taxable income, even if you don't provide anything in return. The IRS typically views these funds as contributions to your business operations rather than gifts. Since you're an LLC, the money would likely be treated as regular business income and should be reported on your business tax return. You would potentially owe income taxes on these amounts. However, there's good news - since you're using the funds to purchase equipment, you can likely deduct the cost of the mixer as a business expense or capitalize it as an asset and depreciate it over time, which can offset the tax impact. Keep detailed records of all funds received and how they're used. I'd also recommend consulting with your accountant before starting the campaign to make sure you understand the full tax implications for your specific situation.

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Zoe Stavros

•8M

That's a common misconception when it comes to businesses. While personal gifts generally aren't taxable to the recipient, the IRS views contributions to businesses differently. When people contribute to a business GoFundMe, even with nothing in return, the IRS typically considers this business income rather than a gift. The "gift" classification usually only applies between individuals, not when the recipient is a business entity. The donors are essentially providing financial support to a commercial enterprise, which falls under business income in the eyes of the IRS.

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Mei Chen

•8M

I actually had this EXACT same question last year when we were fundraising for new equipment for our salon. I was so confused by all the different tax advice I was getting. I finally used this AI tax assistant called taxr.ai and it made everything crystal clear! They analyzed my business structure and the GoFundMe situation and gave me specific guidance on how to classify the funds and what forms I needed. It was super helpful because they explained that while the income was taxable, I could offset it with the depreciation of the equipment. The guidance was spot-on and saved me from making a costly mistake. If you're confused about this (it's definitely complicated!), I'd recommend checking out https://taxr.ai - you upload your docs and explain your situation, and they break everything down in simple terms.

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Mei Chen

•8M

It's different from asking your accountant because you get immediate answers without scheduling an appointment, and it costs way less. It's AI-powered but trained specifically on tax regulations, not just generic advice. I actually showed the analysis to my accountant later and he was impressed with how accurate it was. For S-Corps, the platform definitely handles that too. The tax treatment would be somewhat different since S-Corps have pass-through taxation. When I was using it, you specify your business structure and it tailors the advice accordingly. The platform explained to someone else how S-Corps would report crowdfunding income and the implications for shareholders.

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Liam Sullivan

•8M

I was actually really skeptical about using an AI for tax advice, but I gave taxr.ai a try after seeing it mentioned here. I was surprised by how detailed the guidance was! I uploaded screenshots of our GoFundMe campaign and our business formation docs, and it gave me specific advice about how the funds would be treated for tax purposes. What I found most helpful was that it explained how to properly document everything to show the IRS the connection between the fundraising and the equipment purchase. This was crucial because it helped us prepare for tax season without anxiety. It even generated a memo I could keep with our tax records explaining the treatment of these funds. Definitely worth checking out if you're in this situation!

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CosmicCommander

•8M

Have you tried calling the IRS directly? I had a similar question about fundraising for my small business and spent DAYS trying to get through to someone. Always on hold, disconnected, transferred to wrong departments... absolute nightmare. Then I found this service called Claimyr that got me connected to an IRS agent in under 45 minutes! https://claimyr.com Basically they use some tech to hold your place in line, then call you when they get an agent. I was super skeptical but the video demo convinced me: https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with confirmed that business crowdfunding is generally taxable income but gave me specific guidance for my situation. Saved me hours of frustration and got me an official answer I could rely on.

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CosmicCommander

•8M

They don't call the IRS for you - they hold your place in line using their system. Think of it like a virtual assistant that waits on hold so you don't have to. When they reach an agent, they connect the call to your phone. It worked for me because I didn't have to keep redialing or stay by the phone for hours. They definitely don't have access to your personal tax info. They just connect the call to you, and then you speak directly with the IRS agent. I was super skeptical too (hence why I watched their demo video first), but it's a legitimate service that just solves the horrible wait time problem. They don't hear your conversation with the IRS at all.

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Fatima Al-Qasimi

•8M

Ok I have to eat my words here. After posting that skeptical comment, I decided to try Claimyr because I've been trying to reach the IRS about a business issue for weeks. I was SHOCKED when I actually got connected to a real person in about 38 minutes. I specifically asked about my planned crowdfunding campaign for my food truck and the agent confirmed that yes, it would be considered taxable income, BUT she gave me specific advice about documenting everything and how to properly classify it on our tax forms. She even emailed me some resources about business equipment purchases. I'm actually glad I was wrong about this service - saved me so much time and frustration!

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Dylan Cooper

•8M

I think everyone is overlooking an important option - have you considered setting up the GoFundMe through a separate non-profit entity instead of directly through your business? My brother's restaurant did this by partnering with a local business development non-profit. The donations went to the non-profit (tax-exempt) and then they purchased the equipment and "donated" it to the business as part of their mission to support local businesses. It was more paperwork upfront but saved a lot on taxes. You'd need to find a willing non-profit partner with a compatible mission, but it's worth exploring.

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Dylan Cooper

•8M

There were some restrictions - the equipment had to be used in line with the non-profit's mission (in their case, supporting local food businesses and job creation). They had to document how the equipment was supporting those goals with quarterly reports for the first year. The paperwork wasn't too bad actually. The non-profit handled most of it since they're used to the documentation requirements. My brother just had to provide some information about his business plan and how the equipment would benefit the community. The whole process took about 3 weeks to set up, but the tax savings made it worthwhile. The non-profit also helped with promoting the fundraiser which got them more donations than they might have received on their own.

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Zoe Stavros

•8M

You're close, but it depends on the equipment and depreciation rules. For many business equipment purchases, you can't deduct the full amount in year one - you have to depreciate it over several years (often 5-7 years for kitchen equipment). So you might have $12,000 in GoFundMe income this year, but only be able to deduct $2,400 of the mixer this year (assuming 5-year depreciation). That means you'd have $9,600 in net taxable income from this transaction for the current year. You'd get the remaining deductions spread over future years. Now, there are some exceptions like Section 179 expensing or bonus depreciation that might let you deduct it all in year one, but those have limitations and phase-outs based on your total equipment purchases and business income.

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