Crowdfunding Gifts Mistakenly Taxed as Income

Mutual aid funds received through online platforms may be incorrectly reported as taxable income.

Published on Feb. 23, 2026

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Many people have turned to online crowdfunding platforms like GoFundMe, Venmo, and CashApp to offer financial support to others in times of crisis. However, recipients of these funds may receive a 1099-K tax form, incorrectly treating the money as earned income rather than a tax-exempt gift. Researchers are studying how the tax system impacts charitable crowdfunding and those who receive aid through it, as the tax code has not kept pace with the growth of peer-to-peer giving.

Why it matters

Mutual aid, where people directly meet the needs of others outside of traditional nonprofit or government systems, surged during the COVID-19 pandemic. However, the tax code still struggles to differentiate between genuine charitable giving and income, potentially penalizing those already facing hardship and discouraging future donations.

The details

Payment platforms frequently issue tax forms without differentiating between payments for goods or services and crisis-related support, even when recipients are not selling anything. While a 2025 tax law change restored the federal 1099-K reporting threshold to over $20,000 in gross payments, some states still require the forms for lower amounts. Recipients of mutual aid may still need to document that funds received were gifts, not earned income.

  • In 2021, changes to federal tax reporting rules required platforms to issue 1099-K forms to anyone receiving over $600 in payments.
  • On July 4, 2025, a tax-reform-and-spending package was signed into law that restored the federal 1099-K reporting threshold to over $20,000 in gross payments and more than 200 transactions.

The players

Indiana University's Lilly Family School of Philanthropy

A research institution studying the impact of tax policies on those receiving charitable funds through crowdfunding.

Internal Revenue Service (IRS)

The U.S. federal agency responsible for administering and enforcing federal tax laws.

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What’s next

Researchers and tax experts recommend that recipients of mutual aid funds over $20,000 keep detailed documentation and consult a tax professional, as some states still require 1099-K forms for lower amounts.

The takeaway

The growth of peer-to-peer giving through crowdfunding platforms has outpaced the tax code's ability to properly distinguish between charitable gifts and taxable income, creating confusion and potential hardship for those relying on mutual aid during times of crisis.