Within days, crowdfunding sites reportedly raised more than $2 million to support victims of the Boston Marathon bombing tragedy. While online giving provides a quick and easy mechanism for supporting those in need, donors need to ask questions and know what to expect when contributing through crowdfunding websites.
Crowdfunding websites are established to allow solicitation of money for a variety of purposes. The organizations to which the funds are given can be, but are not necessarily charitable; some contributions through these sites may not be tax deductible as charitable donations.
Donors should know that crowdfunding websites typically take a percentage of the donation ranging from 5%-20% and may also deduct payment processing fees above this. A few of these sites may allow the donor to cover all such fees but in many instances the recipient may not receive the full amount given.
Crowdfunding websites can raise money for legitimate charities. However, if you want to be sure that the charity receives the entire amount given, it is a good idea to go to the charity’s website and make a direct online contribution. There are advantages to giving through established charities including the requirement that they register with state government authorities, must report on use of funds, and are subject to the oversight of a board of directors.
“If you choose to make a crowdfunding gift to aid individual victims of a tragedy like the Boston Marathon bombing,” said Claire Rosenzweig, President and CEO of the BBB Serving Metro New York, “consider directing your donation to causes established by people that you personally know and trust, to victim relief funds that are overseen by an appointed trustee or attorney, or to reliable charities with appropriate expertise.”
According to the IRS, only certain types of tax-exempt organizations are eligible to receive contributions deductible as charitable gifts. Crowdfunding donations made to support a specific individual or family are considered a “personal gift” and not a charitable contribution. If charitable tax deductibility is important to you, be sure to donate to an eligible organization as defined by the IRS.
Additional tips:
- Make sure the crowdfunding websites on which you donate securely encrypt all transactions using Secure Socket Layer (SSL) technology.
- Before giving, read the crowdfunding site’s statement about its policies, including its terms, conditions, and privacy policy, to understand how your donation and your personal information will be handled.
For more information about charitable giving and about 11,000 Charity Reports, go to www.ny.give.org.
For more tips you can trust, visit www.newyork.bbb.org, and to sign up for our weekly scam alerts, visit https://cbbb.wufoo.com/forms/email-sign-up/.
