Crowdfunding & Taxes in Canada

Alright, so you're wondering if that GoFundMe money for your cousin's rare illness is going to get Uncle Sam (or in this case, our friendly folks at the CRA in Canada) knocking on your door for taxes? Let's break down this legal mumbo-jumbo from a CRA policy issued in August 2022, into something you can actually understand – with a little chuckle or two along the way.

Basically, the CRA (that's the Canadian Revenue Agency) had a chinwag about this very question in what they call "CRA View 2020-0838061E5" – catchy name, right? They were asked if the $22,085 someone raised on GoFundMe for their step-daughter's treatment was taxable income or just a plain old gift.

Now, the CRA being the CRA, they didn't give a simple "yes" or "no." Instead, they pulled out the classic "it depends" card. They said it doesn't really matter how you get the money – whether someone hands you a cheque or clicks a "donate" button online. What really matters is why they gave you the money in the first place.

Think of it like this: the CRA is trying to figure out if the money was a "windfall" (like winning the lottery – cha-ching!) or a "gift" (like your sweet aunt sending you birthday money). Generally, windfalls are taxable, but gifts... well, gifts are usually in the clear.

To figure this out, the CRA pointed to their fancy rule book, specifically "Income Tax Folio S3-F9-C1" (don't worry, you don't need to memorize that!). This rule book talks about what makes something a "gift."

In the specific case they were looking at – the one with the GoFundMe for the sick step-daughter – the CRA leaned towards calling it a gift. Why? Because all the boxes for a "gift" seemed to be ticked:

• Voluntary transfer: People willingly opened their wallets and donated. No one was forced to cough up the cash.
• Freely given: Those generous folks gave the money because they wanted to help. There were no strings attached (like getting a free car wash in return).
• No benefit to the giver: The people donating weren't getting any special perks or advantages for their kindness, other than maybe a warm fuzzy feeling.

So, the good news from this CRA chat is that if you're crowdfunding to help someone out of a tough spot, like dealing with a serious illness, the CRA is likely to see those donations as gifts, and therefore, not something they'll want a piece of come tax season.

This is pretty helpful for anyone using these online fundraising platforms, whether you're a registered charity, a non-profit trying to do good, or just a family rallying around a loved one. While the CRA is always going to look at the specifics of each situation, their little peek into how they view gifts and windfalls can give folks a better idea of where they might stand when those online donations start rolling in. Just remember, every situation is unique, so when in doubt, maybe have a chat with a charity lawyer – they speak fluent "CRA-ese"!

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Alright you say, but you're still wondering if that warm fuzzy feeling you get from donating to a GoFundMe also comes with a little tax break? Let's dive into whether those digital high-fives for your favorite cause can also give your wallet a bit of a hug from the taxman (or tax-woman!).

You're right, these days it's super easy to be a digital do-gooder! With all these cool online fundraising sites, helping out charities is a breeze. It's like giving a virtual hug with your credit card – pretty neat! And the best part is, the top-notch crowdfunding platforms usually make it easy-peasy for charities to give you those all-important tax-deductible receipts. They're like little thank-you notes that can actually save you some money come tax time. Plus, they often keep track of all your good deeds in one spot, so you don't have to hunt through a mountain of emails when tax season rolls around.

So, the short and sweet answer is: Heck yeah (usually)! If you donate to a fundraiser that's officially run by a certified charity, then those GoFundMe contributions are generally tax deductible. But here's the little catch – and it's a pretty important one: make sure that charity is actually registered with the CRA. You wouldn't want to donate with a good heart only to find out later that the taxman doesn't see it the same way.

Think of it like this: the CRA has a VIP list of charities they've given the thumbs-up to. Only donations to the folks on that list will get you a tax deduction. So, before you click that "donate" button, it's always a good idea to do a quick little check with the CRA to make sure your chosen charity is on the up-and-up. A little bit of homework can save you some tax-time blues later on!

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