Would donations made payable to a 501(c)(3) educational institution be taxable to the payer?

by Amy M. Swartzfager, CPA | Jul 30, 2019

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If GoFundMe donations (or any donations for that matter) are made payable to a 501(c)(3) educational institution on my behalf, would the donations be taxable to me?

The IRS defines a gift as the transfer of property by one individual to another while receiving nothing, or less than full value, in return. Thus, if payments are made on your behalf and the payer is not receiving anything from you for the payments, it would be considered a gift. Gifts are not taxable to the recipient. Depending on the amount of the payment made, the payer could have gift tax implications. An individual can make a gift of up to $15,000, per individual, per year, without having to file a gift tax return.

Payments made directly to a 501(c)(3) educational institution for tuition only are exempt from gift tax. Per IRS Reg Section 25.2503-6:

“The unlimited exclusion is permitted for tuition expenses of full-time or part-time students paid directly to the qualifying educational organization providing the education. No unlimited exclusion is permitted for amounts paid for books, supplies, dormitory fees, board, or other similar expenses which do not constitute direct tuition costs.”

You may want to consider opening up a 529 plan instead. This would be an education savings account in your name. Others can contribute funds into the account, and then you can use the funds for qualified educational expenses (not just tuition). The benefit to this is that in some states there are tax deductions or tax credits for the person who contributes to the account. The downside is that the contributions to this account would not qualify for the gift tax tuition exclusion.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Amy M. Swartzfager, CPA, is a senior tax analyst with API Technologies Corp. in Fairview, Pa.

Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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