Crowdfunding Campaigns: Are Funds Taxable? – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Crowdfunding has become an essential way for Canadians to raise money—whether through GoFundMe, Kickstarter, Indiegogo, Patreon, or other online platforms. But while crowdfunding feels simple, the tax rules are not. Depending on the nature of the campaign, funds raised may be taxable income, non-taxable gifts, business revenue, or advances for future products. CRA reviews crowdfunding closely, and misunderstandings can lead to reassessments, GST/HST issues, and penalties. This guide explains how each type of crowdfunding is taxed in Canada and how to avoid costly mistakes.

Legal and Regulatory Framework

Crowdfunding taxation is governed by the Income Tax Act, CRA’s published positions on crowdfunding, and GST/HST rules. CRA divides crowdfunding into three categories: donation-based crowdfunding (gifts), rewards-based crowdfunding (pre-selling goods or services), and equity-based crowdfunding (securities). CRA requires taxpayers to report all funds unless clearly exempt. Funds received through platforms like Stripe, PayPal, and GoFundMe often generate third-party reporting, meaning CRA may already have access to the data.

Key Court Decisions

In Comeau v. Canada, courts confirmed that online income is taxable even if informal. In Rogers v. Canada, CRA denied business expense deductions where documentation was inconsistent, highlighting the need for proper records. In Canada Without Poverty v. Canada, the courts emphasized that donations must be voluntary gifts with no benefit to the donor—critical when determining whether crowdfunding proceeds are taxable.

Three Types of Crowdfunding and Their Tax Treatment

1. Donation-Based Crowdfunding (GoFundMe Personal Causes)

Funds raised for personal support—such as medical emergencies, accidents, hardship, or community support—are generally treated as non-taxable gifts if donors receive nothing in return. However, if the campaign is run for a business, the funds may be taxable. Documentation must show that donations were voluntary and provided with no expectation of reward.

2. Rewards-Based Crowdfunding (Kickstarter, Indiegogo)

When backers receive something in return—such as a product, membership, digital item, or early access—the funds are treated as business income. Creators must report funds as revenue, even if used to produce the promised products. GST/HST may also apply because this type of crowdfunding is considered a sale of goods or services.

3. Equity-Based Crowdfunding

When contributors receive shares or ownership interest in a business, the amounts received are not taxable revenue but are treated as capital contributions. Complex securities rules apply, and proper documentation is required. GST/HST usually does not apply to the sale of equity.

GST/HST Implications

Rewards-based crowdfunding often triggers GST/HST when backers receive taxable products or services. GST/HST becomes mandatory once the business exceeds the $30,000 small supplier threshold. Even personal campaigns may involve GST/HST if goods or services are later provided. Creators must track the location of backers to apply correct tax rates.

Expenses and Record-Keeping

Whether funds are taxable or not, CRA requires documentation for: platform fees, advertising, production costs, product delivery expenses, website hosting, GST/HST paid, refund obligations, and bank deposits. Sole proprietors report taxable crowdfunding income on Form T2125; corporations report it on T2 filings. Keeping clean records protects you during CRA review.

Special Situations

1. Crowdfunding for Charities

Funds raised on behalf of a registered charity may qualify as charitable donations if receipts are issued properly by the charity—not the crowdfunding organizer.

2. Crowdfunding for Business Startups

Funds raised to develop prototypes or fund product launches are generally taxable as business income.

3. Patreon and Membership Platforms

Recurring subscriptions or memberships are taxable business income. GST/HST may apply depending on the nature of benefits provided.

4. Crypto-Based Crowdfunding

Funds raised in cryptocurrency are taxable at the crypto’s fair market value in CAD on the date received.

Common CRA Audit Triggers

CRA frequently audits campaigns for: unreported crowdfunding deposits, claiming personal campaigns as business losses, rewards not delivered, missing GST/HST filings, mixing personal and business accounts, not reporting platform payouts, crypto-based fundraising, and large GoFundMe transfers flagged by CRA’s banking algorithms.

Mackisen Strategy

At Mackisen CPA Montreal, we help individuals, startups, and businesses understand the tax implications of crowdfunding campaigns. We classify funds correctly, prepare T2125 or T2 filings, manage GST/HST obligations, set up bookkeeping systems, prepare expense tracking, and defend you during CRA audits. Our guidance ensures legal compliance and maximum tax efficiency.

Real Client Experience

A Montreal startup that raised $120,000 on Kickstarter avoided penalties after we classified funds as taxable business income and applied GST/HST correctly. A family receiving GoFundMe support avoided tax after we prepared documentation showing the funds were gifts. An artist using Patreon for monthly memberships passed CRA review after we categorized benefits and reported taxable income correctly. A crypto-based fundraising campaign avoided reassessment after we documented fair market value at receipt.

Common Questions

Are GoFundMe donations taxable? Usually not—if donors receive nothing in return. Is Kickstarter income taxable? Yes—treated as business income. Do I charge GST/HST on rewards? Yes—when taxable goods or services are provided. Are equity crowdfunding proceeds taxable? No—treated as capital contributions.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Canadians navigate the complex tax rules surrounding crowdfunding. Whether fundraising for a personal cause, launching a business, or offering digital memberships, we ensure full compliance with CRA requirements.