Fundraising on GoFundMe: How It Might Affect Your Medicaid, SSI, and Taxes
Key takeaways:
GoFundMe is a popular fundraising platform that many families use to get help paying for medical expenses, such as prescription medications and in vitro fertilization (IVF) treatments.
Medicaid and Supplemental Security Income (SSI) recipients could lose their benefits if their fundraising campaign boosts their income and assets beyond the allowed level.
Before starting a GoFundMe account, it’s important to understand reporting requirements and income limits to prevent negative consequences down the line.
Table of contents
Crowdfunding websites like GoFundMe have become popular fundraising options for people who need help covering medical expenses. But these funds can come with unintended negative consequences if you don’t plan ahead.
If you have Medicaid or Supplemental Security Income (SSI), the funds you raise through GoFundMe could potentially boost your income beyond the threshold for eligibility. This could cause you to lose your benefits.
Before starting a GoFundMe campaign, it’s important to understand the reporting requirements and income limits, so you don’t unintentionally sabotage your benefits.
What is GoFundMe?
GoFundMe is an online crowdfunding platform that allows people to raise money for a variety of situations, including paying medical expenses. If you need help paying for health insurance, prescription medications, or an upcoming surgery, raising money on GoFundMe may be an option to consider.
Some common medical conditions that people raise money for are:
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People have also turned to GoFundMe to pay for in vitro fertilization (IVF), which can cost more than $20,000 for a single cycle. It’s common to need more than one cycle for a successful pregnancy so the total cost of IVF can be more than $50,000. GoFundMe allows people to set up a campaign to raise money from family and friends to cover these expenses.
How does GoFundMe work?
Before starting a fundraising campaign, it’s important to consider the pros and cons of GoFundMe. You’ll need to input your personal information and share your health story as part of fundraising, for example.
If you’ve reviewed your options and think GoFundMe is a good opportunity for you to raise money for your medical bills, here are the steps you’ll need to take to get started and collect your fundraising dollars:
Set up a campaign. Visit www.gofundme.com to create an account. You can raise funds for yourself, someone else, or charity. Click on “Start a GoFundMe,” select your location, and describe why you are raising funds.
Determine your fundraising goal. Share the amount you would like to raise. If you find out you need more money, you can always change your fundraising goal later. It’s important to keep in mind that you’ll have to pay a transaction fee for each donation.
Add your bank account information. You’ll need to add your bank account information to receive the funds you raise. You can switch your bank account information at any time during your fundraiser.
Share your story. Let potential donors know who you are and why you are fundraising. You can use videos and pictures to personalize your GoFundMe page and attract donors.
Promote your GoFundMe campaign. You can use social media to share information about your campaign and keep people updated about your progress.
Withdraw money. All donations will go through a verification process before you receive the funds in your bank account. After the donations have been verified, you can receive them as often as you choose (daily, weekly, or monthly). It usually takes 2-5 business days for the money to arrive in your account.
Does GoFundMe count as income?
Generally, GoFundMe donations are considered a personal gift. Because of this, the funds are typically not taxed as income in the U.S. In some cases, the funds may be classified as unearned income. If you have questions about your GoFundMe campaign, it’s important to reach out to a qualified tax professional to ensure you meet all reporting requirements.
Let’s say you set up a GoFundMe campaign to pay for Zepbound (tirzepatide) for weight loss since it’s not covered by Medicare. You raise $1,200 from your family members, friends, and strangers through the crowdfunding platform. Since you are not providing donors with a service or product in exchange for their donation, the money you raised is considered a gift. This is typically not taxed as income. The donation is also not considered a write-off for the donor since it was made to a personal campaign. Donations have to be made to a GoFundMe charity fundraiser to qualify as tax deductible.
Does GoFundMe money affect Medicaid and SSI?
When it comes to Medicaid and SSI, GoFundMe funds can be counted in the eligibility calculation. To maintain eligibility for Medicaid and SSI, the recipient’s income must fall below a certain threshold. Medicaid income limits vary by state, while SSI benefits are based on countable income and state-specific limits.
GoFundMe proceeds can push a recipient over the SSI income threshold depending on how the funds are classified. If the funds are considered unearned income for the beneficiary, they must be reported to the U.S. Social Security Administration. SSI recipients should report changes in income within 10 days of the last day of the month in which the change occurred.
SSI calculates your total monthly benefit by subtracting your non-countable income from your gross income. The difference between the two numbers is your countable income. If your countable income exceeds the allowable limit, you won’t qualify for SSI benefits.
The rules are different for beneficiaries of the Social Security Disability Insurance (SSDI) program. SSDI recipients do not have to worry about GoFundMe proceeds hurting their eligibility, because there are no caps on unearned income or assets.
Before starting a GoFundMe campaign, you should understand how your SSI and Medicaid benefits work and the maximum amount you can raise and maintain eligibility.
Should you start a GoFundMe fundraiser if you have Medicaid or SSI?
If you are applying for SSI or Medicaid, you should think about how soon you’ll start a GoFundMe fundraiser, because proceeds from a crowdfunding platform can easily push you over the resource limit, says Michael Guerrero, a certified Medicaid planner in Truckee, California. He recommends finding someone who is trustworthy (other than your spouse) to set up and manage the GoFundMe account to avoid negative consequences.
“If a friend or loved one sets up the GoFundMe campaign, the money is legally not in the name of the beneficiary,” Guerrero told GoodRx Health. “The money is available to help them, but it’s handled by whoever owns the account. For Medicaid purposes, this income is not treated as available; it’s treated as supplementary. If you have the good fortune of having someone else create the account, then you may not exceed the resource limits.”
If you set up a GoFundMe account on your own and your income now exceeds state thresholds, don’t start panicking. You may be able to “spend down” your income, so that you can financially qualify for Medicaid or SSI benefits. Typically, unused funds carried over from a prior month are classified as an asset. But spending down allows you to reduce your countable assets. .
Does GoFundMe report funds to the IRS?
GoFundMe does not report funds collected from donors as earned income to the IRS. It is an online fundraising platform that facilitates the exchange of funds between donors and donees. Users confirm that they are not providing services or goods in exchange for the money raised on the website when they sign up. So GoFundMe doesn’t have to issue any tax documentation at the end of the year.
But before you dismiss all potential tax responsibilities, you should consult with a tax professional, such as a:
Certified public accountant (CPA)
Enrolled agent (EA)
Attorney
Keep in mind that there are certain situations, such as providing goods and services in exchange for funds raised, that may require a crowdfunding platform to issue Form 1099-K to the campaign organizer and the IRS. You’ll only receive this form if the money you raised meets the reporting threshold. But receiving it does not automatically mean you have to pay taxes on the money you raised. A tax professional can help you determine various reporting considerations.
It’s important to keep complete and accurate records about your GoFundMe campaign for at least 3 years in case you need to verify how much you received and how you used the funds.
What are the Form 1099-K reporting thresholds?
The IRS initially stated that a Form 1099-K should be provided to GoFundMe fundraisers when the total payments distributed exceed $20,000 or 200 transactions. But there are plans to change the reporting requirement to payments of $600 or more, regardless of the number of transactions or donations.
The IRS delayed the $600 1099-K reporting threshold for third-party platforms in 2023, but states such as Massachusetts, Vermont and Virginia have already adopted the threshold. Now, the IRS is planning a $5,000 reporting threshold for 2024 as part of phasing in the $600 reporting threshold.
How to find low cost Medicaid planners in your state
Medicaid rules and eligibility vary by state and can often be difficult to navigate. If you need assistance, you can work with a certified Medicaid planner in your state. These professionals can help you assess your financial situation and eligibility for Medicaid.
There are different types of Medicaid planners you can choose from, including:
Elder-law attorneys
State health insurance assistance program (SHIP) counselors
Eldercare financial planners
Many Medicaid planners provide a free consultation. But before you meet with one, it’s important to do your research and determine what type of Medicaid planner will work best for your specific situation. Websites like www.medicaidplanningassistance.org can help you find the best Medicaid planner for your specific needs.
The bottom line
Fundraising on GoFundMe can be a lifesaver when unexpected healthcare expenses come up. However, you’ll want to understand how those funds can impact any income-based programs that you qualify for.
If you are enrolled in Medicaid or Social Security Income (SSI), make sure you understand the income and asset limitations in your state. You should also communicate any changes in your income as soon as possible, and seek assistance from a consumer-focused nonprofit group or tax professional when needed. Failing to take the appropriate steps could jeopardize your federal and state benefits.
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References
American Council on Aging. (2023). Medicaid planners: Pros & cons of public and private assistance.
American Council on Aging. (2024). Medicaid eligibility income chart by state.
GoFundMe. (2023). Taxes for organizers.
GoFundMe. (2024). How to transfer funds.
GoFundMe. (2024). Learn about fees.
Internal Revenue Service. (2024). Topic no. 506, charitable contributions.
Internal Revenue Service. (2024). Understanding your form 1099-K.
Massachusetts Department of Revenue. (2020). Massachusetts reporting requirements for third party settlement organizations – Form 1099-K.
Vermont Department of Taxes. (n.d.). 1099-K notices | Frequently asked questions.
Virginia Department of Taxation. (n.d.). Did you receive a 1099-K? What you need to know.
U.S. Social Security Administration. (n.d.). Disability.
U.S. Social Security Administration. (n.d.). Supplemental Security Income (SSI).
U.S. Social Security Administration. (n.d.). Understanding Supplemental Security Income reporting responsibilities – 2024 edition.
U.S. Social Security Administration. (n.d.). Understanding Supplemental security Income (SSI) income – 2024 edition.
