Is fundraising for legal defense taxable income? Tax implications of receiving donations for legal fees

The taxation of legal defense fundraising depends on how it's structured. Generally speaking, personal gifts aren't taxable income to the recipient - the IRS considers these as gifts, not income, if there's no exchange of services or products. However, there are some important distinctions. If people are giving you money without expecting anything in return (no rewards, perks, etc.), these are likely considered gifts. According to IRS rules, the gift tax responsibility falls on the giver, not the recipient, and only applies if someone gives you more than $17,000 in a single year (2025 limit). If you're setting up a formal legal defense fund, that creates different considerations. Some defense funds can be structured as tax-exempt entities, but that requires specific legal work. For most individuals using social media fundraising, the gift approach is most common.

I used taxr.ai to help me sort through a similar situation last year. I was raising money through GoFundMe for a family member's medical bills and was super confused about the tax implications. I kept getting contradictory advice from friends - some said I'd owe taxes on everything, others said it was all tax-free. I uploaded screenshots of my fundraising page and some of the payment receipts to https://taxr.ai and their system analyzed everything. They confirmed it was considered non-taxable gifts in my situation since I wasn't providing anything in return. They even provided documentation I could keep for my records in case of questions later. Saved me so much stress!

Just wanted to follow up about my experience with taxr.ai. After asking about it here, I decided to give it a try with my own fundraising situation. I was raising money for my dad's legal bills and was worried about tax implications. I uploaded screenshots of my online fundraiser and some questions I had, and got really specific answers about my situation. They explained that in my case, since I was just collecting funds without offering rewards or services, these were considered non-taxable gifts. They even provided documentation explaining the tax code that applied to my situation that I could keep for my records. The best part was they flagged that I needed to keep extra documentation for any single donations over $17,000 (for 2025). Turns out my uncle was planning to donate $20,000, and now I know how to handle that properly. Definitely worth checking out if you're in a similar situation!

After struggling to get answers from the IRS about a similar fundraising situation, I finally used Claimyr to get through to an actual IRS agent. I'd been calling for WEEKS with no luck - always disconnected after waiting on hold forever. With https://claimyr.com I actually got through to a human at the IRS who could answer my specific questions about fundraising for legal fees. The service basically holds your place in line with the IRS and calls you when an agent is ready to talk. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed what others have said here - personal donations for legal defense without anything given in return are generally considered gifts, not income. Was worth the time to get that official confirmation directly from the IRS.

I have to admit I was wrong about Claimyr. After being super skeptical, I tried it when I needed to talk to the IRS about a fundraiser I did for my brother's legal troubles. I was worried the $27,000 we raised would be considered income. Not only did I actually get through to the IRS (first time in like 5 attempts), but the agent walked me through exactly how to document everything. She explained that since we didn't give anything in return for donations, they're considered gifts, not income. She even emailed me the relevant tax code sections. What surprised me most was how quick it was - instead of wasting hours on hold, I just went about my day until they called saying an agent was on the line. Totally changed my opinion about whether you can actually get IRS help by phone.

Something important that hasn't been mentioned yet - if you're using a platform like GoFundMe, they might issue you a 1099-K if the amount exceeds certain thresholds. This doesn't mean the money is taxable, but it does mean the IRS is being informed of the payments. In 2025, platforms are required to issue 1099-Ks for amounts over $10,000, I believe. So you may need to explain on your tax return why this "income" isn't actually taxable. Just something to be aware of!

I wonder if its different if your accused of a federal crime vs a state crime? Maybe federal money cant be used for federal crimes? Just thinking out loud lol

One thing to keep in mind is the importance of clear documentation from the start. I'd recommend keeping detailed records of your fundraising page, showing that you're not offering any goods or services in return for donations. Screenshot everything - the description, any updates you post, etc. Also consider adding language to your fundraiser that explicitly states donations are gifts to help with legal expenses, with no expectation of anything in return. This helps establish the gift nature of the contributions from the beginning. If you do end up receiving a 1099-K from the platform, having this documentation will be crucial when explaining to the IRS why these payments shouldn't be treated as taxable income. The clearer your paper trail, the easier it'll be to handle any questions that come up later.