Will my business owe taxes on GoFundMe campaign money used to purchase equipment?

The key factor here is whether you're operating as a business or a non-profit. For a business entity (LLC, corporation, etc.), funds received through GoFundMe are generally considered taxable income, even if earmarked for equipment. The IRS typically views these contributions as income first, then you purchasing the equipment becomes a business expense that you can deduct. The fact that you're not providing goods or services in return doesn't exempt you from taxation in a business context. It's different from a personal crowdfunding campaign where donations might be considered gifts (which aren't taxable to the recipient).

Hey there, pottery person! I went through something really similar with my coffee shop last year when our espresso machine died. I was stressing about the tax implications too until I found this AI tool called taxr.ai that helped me figure everything out. I uploaded my GoFundMe data and business structure info to https://taxr.ai and it analyzed exactly how to handle the campaign funds on my tax returns. It showed me how to properly document that the money was both income AND an offsetting business expense when we bought the new machine. Super helpful because it turns out there are specific ways to code these transactions that I would have missed.

Just wanted to update after trying taxr.ai for my bakery's crowdfunding campaign! It was actually super helpful - it showed me exactly how to report the funds on my taxes and gave me templates for keeping records that show the direct connection between the donations and equipment purchase. The best part was it pointed out that I could potentially use Section 179 to deduct the full equipment cost in the same year, which would offset the crowdfunding income. It even generated a specific report I can keep with my tax documents in case of questions later. Definitely helped me feel more confident about not messing up my taxes with this campaign!

One thing nobody's mentioned is that dealing with the IRS can be a nightmare if you have questions about this specific situation. I tried calling them for weeks about a similar fundraising question for my landscape business and kept getting disconnected or waiting for hours. I finally used https://claimyr.com to get through to an actual IRS agent. They basically hold your place in line and call you when they've got an agent on the phone. Check out how it works here: https://youtu.be/_kiP6q8DX5c - it saved me literally hours of hold time. The IRS agent confirmed that yes, crowdfunding for business equipment is generally taxable income, but also explained exactly how to document it properly to make sure the business expense deduction was properly applied against it.

Ok I need to publicly eat my words here. After my skeptical comment yesterday, I decided to try Claimyr for an unrelated tax issue I've been trying to resolve for MONTHS. I'm honestly shocked - they got me through to an IRS agent in about 35 minutes, while I was busy working on other things. I've literally wasted entire afternoons on hold before, and this time I just got a call when they had an agent on the line. The agent helped clear up my issue AND I asked about the crowdfunding situation since I'm considering doing something similar. She confirmed what others have said - for a business, crowdfunding typically counts as income, but equipment purchases are deductible, so proper documentation is key. Just wanted to share since this actually worked surprisingly well.

I'm a potter too and did a GoFundMe for a new wheel last year. Here's what my accountant told me: yes, the money is technically income, BUT since it went straight to business equipment, it's also a business expense. Since the income and expense were the same amount, they essentially canceled each other out. She did say to keep VERY good records showing that the campaign money went directly to the equipment purchase - copies of the GoFundMe final amount, the equipment invoice, and bank statements showing the transfer. That documentation was super important.

Don't forget about your options for deducting the equipment! Since you're buying a $6,500 kiln, you have a few choices: 1) Section 179 deduction - deduct the full cost in the year you buy it 2) Bonus depreciation - similar to Section 179 but with different rules 3) Regular depreciation - spread the deduction over several years Most small businesses prefer Section 179 since it gives you the immediate tax benefit, which would offset the GoFundMe income right away.

Thanks everyone for all the helpful advice! This thread has been incredibly informative. Just to make sure I understand correctly - the GoFundMe donations will count as business income on our tax return, but then we can deduct the kiln purchase as a business expense, essentially balancing it out? I'm leaning toward using Section 179 to deduct the full equipment cost in the same year since we're still a small operation and this would help offset the crowdfunding income immediately. Does anyone know if there are any specific requirements for Section 179 eligibility with pottery kilns? I assume it qualifies as business equipment, but want to make sure before we launch the campaign. Also planning to be extra diligent about documentation - screenshots of the final GoFundMe total, the equipment invoice, bank transfer records, everything. Better to have too much paperwork than not enough if the IRS ever has questions!

This is such a great discussion! As someone who went through a similar situation with my small woodworking business, I wanted to add one more consideration that hasn't been mentioned yet. If your pottery studio is set up as a sole proprietorship (which many small creative businesses are), the GoFundMe income will flow through to your personal tax return on Schedule C. This means it could potentially affect other things like your self-employment tax calculation, even if the income and equipment expense offset each other for regular income tax purposes. The self-employment tax is calculated on your net business income, so if the crowdfunding pushes your total business income higher (even temporarily before the equipment deduction), you might see a small increase in SE tax. It's usually not a huge amount, but worth factoring into your planning. Also, make sure to check if your state has any specific rules about crowdfunding income. Some states handle it differently than the federal treatment, especially regarding sales tax implications if there's any question about whether you're "selling" something (even if it's just gratitude and recognition). The Section 179 route is definitely the way to go for your situation though - it'll give you the cleanest offset against the GoFundMe income!