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Our family is about to start raising funds to send our sister to therapy session in Poland for her Cerebral Palsy. The total needed is about $39,000. We've set up a fundraising account with youcaring that goes directly into a paypal account. I know that the website gofundme works as a 501(c)3 and donations are tax-deductible, however, they charge 3.5% for all donations that come through. Would we still have to pay taxes on this through a 501(c)3? I know that a gift of that amount, exceeds the general annual allowance, so what kind of tax rate would we be looking at for this? Or would it be smarter to use a site like gofundme, that would possibly eliminate the need for paying taxes on donations? Would it be smart (or even legal?) to separate the total gifted amount among the 5 family members so that it would be below the annual amount allowed for each person?


Expert Mark Anderson's Answer:

You can not have a charity to benefit just one person.  The donotation would be gifts subject to gift taxes.  The donors would be responsible for paying the gift taxes and filing the returns.  If the amount donated by each individual is less than the annual exlcusion there would be no need to worry about gift taxes.  The gifts are not income to your sister.    I would probably use the service that charges the least or just do it yourself.  I hope this answers your question. 

Mark Anderson, JD


21 yrs experience

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