The last few weeks have been unprecedented in both the amount of damage our area has seen as well as the amount of compassion and outpouring of support; neighbors helping neighbors like never before. As the storms have cleared and the recuperation work begun, we realize that for many people the road to recovery will be more like a marathon and not a sprint.
We want to help our clients and their neighbors feel confident in what comes next with their financial future. Here are some resources we hope you find helpful.
IRS HELP
The IRS has set up a special section for hurricane Harvey victims to help them understand what deadlines have been extended and how storm related deductions can be made. You can access that information by clicking https://www.irs.gov/newsroom/help-for-victims-of-hurricane-harvey. If you have questions regarding any of the information on the IRS site, we are happy to help.
CROWDFUNDING
For many of us not directly affected by the flooding, we look for ways we can help. Many friends and neighbors have created fund raising accounts and many more have donated to these accounts. When creating and engaging in crowdfunding, many might wonder about the tax implications for both donors, recipients and administrators. The IRS shares limited information on this topic but knowledge of basic tax principles can help us understand the tax implications.
With donation based crowdfunding, no services are performed and no property is provided. Nothing is offered in exchange for the donation. Since these transactions are of a personal nature, it makes sense that the donation would be treated as a gift and is not taxable income to the person receiving them.
But what about the donor? Is it taxable to them? When it comes to implementing the gift tax, the IRS sets a limit of $14,000. This means that any one individual may gift up to $14,000 in gifts each year before it becomes a taxable event. As long as your contribution to crowdfunding stays under this limit, then the gift tax is not triggered.
What about taking a deduction? It depends on who has set up the crowdfunding account. If the account is created by a not for profit company and you donate to it, then it can be deducted under the rules for a 501(c). However, if an individual sets up and administers the account, then will not fall under the rules for a 501(c) and therefore cannot be deducted.
As with any tax question, it always best to check with your tax adviser for clarification.
If we at Better Bookkeepers, can be of any assistance with any of your disaster related questions, please let us know. We continue to pray for our community and for all of those affected.