Finance & Legal

6 Essential Tax Tips for Crowdfunders in 2024

A guide for your accountant. *This isn’t legal or tax advice*

6 Essential Tax Tips for Crowdfunders in 2024
Illustration by Kickstarter Creator, Olivia M Healy

With tax season right around the corner, we want to make sure our amazing creator community who have crowdfunded their projects in the past year are fully equipped with all the information necessary to prepare and report their financial information.

In this article, we’ll review common tax questions related to crowdfunding your idea on Kickstarter. This is not meant to replace or serve as US-based financial or legal advice, but rather tips and guidance to provide to your accounting professional.

Kickstarter 101

Creators on Kickstarter set a funding goal and deadline for their projects. If the project gains enough support from backers, they can pledge money to make it happen. If the project reaches its funding goal within the deadline, all backers' credit cards are charged. However, if the project fails to reach its funding goal, no one is charged. If a project is successfully funded, Kickstarter takes a 5% fee from the funds collected and charges processing fees.

Backers pledge money to support Kickstarter projects for various reasons. Some supporters are backing their friends' projects, while others are supporting creators they've long admired. Some are simply inspired by a new idea, while others are drawn in by the project's rewards, such as a copy of what's being made, a limited edition, or a custom experience related to the project.

It's important to note that project creators maintain full ownership of their work. Kickstarter cannot be used to offer financial returns or equity, nor can it be used to solicit loans. While some projects funded on Kickstarter may go on to make money, backers are supporting projects to help them come to life, not to financially profit from them.

You can learn more about Kickstarter and how it works in our FAQ.

How do taxes work on Kickstarter?

We can’t give tax or legal advice, but we have compiled this guide for US-based financial professionals who may not be familiar with Kickstarter. 

This information is not intended to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the US Internal Revenue Code or (2) promoting, marketing, or recommending to another party any tax-related matters. This information is just a start.

In general, in the US, funds raised on Kickstarter are considered income.

Creators who exceed the threshold established by the IRS (currently $20,000 in gross volume per year and 200 transactions, which is projected to change again this year) will receive a form 1099-K from Kickstarter in January following the year in which their project was successfully funded. You can learn more in this help center article.

Sales tax may also be applicable in certain cases depending on the local rules. A creator may have an obligation to register, collect, and remit sales taxes in the states in which the backers are located. The creator may also have an obligation to register, collect, and remit sales taxes in any state where the creator lives or spends substantial time.

For project creators outside the US, please refer to your local tax authorities:

What is the 1099-K Form?

Every year, the United States IRS requires that Kickstarter provide a form called a 1099-K (You can learn more in this help center article) for each Stripe account that meets all of the following criteria in the previous calendar year:

  • The project creator’s verified entity (company or individual) and bank account are based in the United States
  • More than $20,000 USD in total gross volume AND
  • More than 200 charges

The 1099-K is a purely informational form that summarizes the sales activity of your account and is designed to assist you in reporting your taxes. It is provided to you and the IRS, as well as some US states. 

For more help understanding your 1099-K, go to IRS.gov. You can also download a blank example of the 1099-K form here.

States with lower threshold requirements

Certain states have thresholds lower than the Federal threshold, and the list changes. 

You can see a current list at this Stripe resource.

If you processed $20K and 200 transactions or less and still received a 1099-K Form

You will receive a 1099-K form for each unique tax identification number (TIN), such as a Social Security Number (SSN) or Employer Identification Number (EIN), that meets the IRS processing threshold. If you received a 1099-K and didn't expect to, it might be because:

  1. You have two or more accounts with the same TIN; one meets the IRS threshold and one does not. Each will receive a 1099-K.
  2. You have two or more accounts with the same TIN; neither are over the IRS threshold individually but, when combined, the threshold is met. Each will receive a 1099-K.
  3. Your business is based in a state where minimum filing requirements are lower than the federal threshold.

What are the tax implications of using Kickstarter?

Funds raised on Kickstarter are generally subject to taxes. How much you owe can vary based on a number of factors, including the deduction of project-related expenses. We highly recommend talking to an accountant or tax advisor. They can guide you through your particular tax scenario in the most advantageous way possible.

While we can't offer tax advice, we have compiled a guide for financial professionals who may not be familiar with Kickstarter.

Is my pledge tax deductible?

In general, no. However, some US projects started by or with a 501(c)(3) organization may offer tax deductions. If so, this will be mentioned on the project page. If you have questions about tax deductions, please contact the project creator directly.

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