KickstarterForum.org

Hi everyone,

I have a question on Kickstarter's tax policy. In this link https://www.kickstarter.com/help/taxes, Kickstarter mentions that some contributions may be categorized as donations that are exempt from tax:

Beyond deductions, a creator may be able to classify certain funds raised on Kickstarter as a nontaxable gift, and not income. A gift is something given out of “detached and disinterested generosity” for personal reasons and without the expectation of getting something in return.

Here is a question. Suppose that some organization buys $5K worth of my product on Kickstarter. Can this organization deduce this amount from the yearly tax they have to pay? For example, if the organization needs to pay $10K in tax by the end of the tax year, can they deduce the $5K they pledged/gifted to my project from this number and reduce the tax they owe to $5K?

This really is a question better asked of a tax advisor. However, it is my understanding that in order for a person to take a tax deduction for a gift, the gift must be made to a qualified, legal non-profit organization (in the US, this would be a 501c3). I don't see how anyone backing your campaign could deduct that amount as a charitable gift unless you have legal non-profit status and they got nothing of value (i.e. a "reward") for backing your campaign. But again, you should really ask a tax professional. Good luck!

I would like to agree with the previous commenter, please ask a tax advisor to avoid possible mistakes. I'd suggest you trying a special tax service like ADP, or at least you can always use adp customer service for personal assistance and consultation, that is quite simple. Good luck

Thanks for posting this, good reminder to remember the tax involved to do it right.

Great question! The issue of whether a contribution to a Kickstarter project can be classified as a tax-deductible gift can be a bit complex. Generally speaking, for a contribution to be considered a charitable donation, it needs to meet specific criteria, including being made to a registered 501(c)(3) organization and being given with no expectation of receiving goods or services in return.

In the scenario you described, where an organization buys $5K worth of your product, it's unlikely that this would be considered a tax-deductible charitable contribution. Since the organization is receiving a product in exchange for their pledge, it does not fit the typical definition of a donation or gift for tax purposes. This is more of a business transaction than a charitable donation.

To clarify the specifics for your situation, I’d recommend consulting a tax professional who can provide guidance based on your project details and the tax regulations applicable to your location. They can help determine the best approach for handling such transactions and advise on any potential tax implications for both you and the contributing organization.