Do you ever get the feeling that health insurance isn’t what it used to be? At the risk of stating the obvious, it really isn’t. It’s estimated that US health insurance costs increased by 740% between 1984 and 2019, with income increasing by a mere 18%. We understand that it’s hard to compare a lot of things between 1984 and 2019 — especially due to technological differences between 1984 and 2019 — but unlike gadgets, we’d call healthcare more of a “need” than a “want.”
It’s also clear that health insurance deductibles have spiraled out of control. It’s not even surprising anymore to see a $5,000 deductible for insurance these days, which means you’d have to spend $5,000 of your own money before insurance pays a dime. Add that to annual insurance premiums, which average around $6,000 per year (unless your employer pays for insurance or you qualify for ACA subsidies), and you end up in this ridiculous situation:
- If you pay for your own health insurance and don’t use it, you have to pay $6,000 per year.
- If you pay for your own health insurance and do use it, you have to pay $11,000 in a single year (premium plus deductible) before getting any benefit from your insurance.
- We’ve seen a bit of legislation here and there, but the reality for many Americans is that we’re not told how much a medical procedure is going to cost until it’s over. Plus, there’s the chance that the insurance company will refuse to cover its portion of expenses. This makes many people afraid to see a doctor even with health insurance.
The question of how things got this crazy is a subject for another time. What we’re getting at here is: it’s entirely understandable why some Americans feel that insurance isn’t worth getting.
But what do you do if you’re uninsured and you or a loved one gets hurt? (Or, what do you do if you are insured and someone gets hurt, and your insurance refuses to cover it?)
What Is GoFundMe?
GoFundMe is a crowdfunding platform. If you’ve never heard the term crowdfunding, it’s exactly how it sounds. People from all around the Internet have the option to chip in real money in order to help you do or accomplish something. Besides GoFundMe, another popular crowdfunding platform that you may have heard of is Kickstarter.
In contrast toGoFundMe, Kickstarter is for funding products and services, whereas GoFundMe is for helping the needy. But this is very important: GoFundMe is not a charity, so you cannot count GoFundMe donations as tax-deductible.
Why Can’t I Deduct GoFundMe Donations?
In order for a charitable contribution to be tax-deductible, donations must be made to a tax-exempt organization. You may have heard of 501(c)(3) organizations, which are called this because of the relevant portion of the IRS’s tax code. To oversimplify, we’re talking about organizations that are meant to help people, like nonprofits and churches. Organizations that enrich their owners or intend to effect political influence are not given tax-exempt status.
Note: If you’re not sure whether an organization has tax-exempt status, check here.
Also Note: Donations to GoFundMe.org are tax-deductible, as it is a 501(c)(3) charity.
Receiving GoFundMe Funds
The good news is that receiving money through GoFundMe is “generally” not counted as taxable income because it works the same way that other gifts are treated by the IRS. In general, one individual can give up to $15,000 to another individual in a single year, without either individual having to pay gift tax on the transaction.
Before you come up with any funny ideas, it doesn’t count if you say that you’re “giving” your “friend” a fancy gaming PC and they’re “giving” you $5,000 in return. Gifts, in the IRS’s eyes, are given freely without the expectation of receiving anything in return, otherwise, it would be seen as a purchase of a good or service.
In conclusion, we understand that GoFundMe often serves the underserved by enabling loved ones, friends, and even strangers to help toward medical or other important expenses that would otherwise be unaffordable. Just because such a donation isn’t tax deductible doesn’t mean it’s a bad idea. We encourage kindness. In fact, we kindly ask you to contact us for your tax and bookkeeping questions and needs!
TL;DR: We don’t have to tell you that the US medical system has problems. Insurance is unaffordable to many, and even many of those covered by it consider it unreliable and disappointing. GoFundMe is an alternate way to help people pay for medical and other important expenses through crowdfunding. Keep in mind that, while GoFundMe donations can lift up the lives of people you know (or people you don’t know), these contributions are not tax deductible.