Crowdfunding Taxes

Crowdfunding & Taxes: Kickstarter’s Hidden Bite (& How to Stop the Bleeding)

Kickstarter_tax_1After months of busting your hump making pitch videos, coming up with rewards, and tweeting like there was no tomorrow, (hopefully) you’ve found yourself celebrating a fully funded crowdfunding campaign. However, before you start reveling in your success, you might want to figure out just how much of those funds will make it into your production’s budget not only after you pay your platform’s fees, but after you pay the taxman as well. Yes, taxes can take a pretty substantial bite out of your funds, but here are a few ideas on how to run your Kickstarter campaign to make the bite less severe come Tax Day next year.

This is a guest post by .

Kickstarter has emerged as an incredibly powerful platform for creatives to crowd-fund their creative work.Kickstarer_tax_2 In October of 2012, I ran a to fund my feature documentary which explores what we in the West might be able to learn about living happier, more meaningful lives from the small Himalayan Kingdom of Bhutan — the only country in the world to use Gross National Happiness as the yardstick for progress. The campaign exceeded our wildest expectations — in two days we met our goal of $45, 000 and finished the campaign at nearly 250% our goal — $112, 000.

We were ecstatic. After months of hustle and personal investment, I finally had the money to bring this film to life. Yet, in the months since closing the campaign, I’ve come face-to-face with the hidden costs of running a Kicktarter campaign. After Kickstarter and Amazon take their share (collectively about 8%), you pay for fulfillment of the prizes you’ve offered (say, 10% to 15%) and income tax on the total (up to 44% depending on the total funds raised and your tax bracket!) you as a creator retain more like 38% – 82% of the total you’ve raised. Not exactly free money.

The single most impactful factor for determining how much of your hard-earned Kickstarter money ends up in your pocket is the degree to which you are able to reduce your tax exposure.

I am by no means an accountant and am not qualified to give proper tax advice, but my hope is that by outlining a few (avoidable) mistakes, I can help save you some money and heartache.

Include the cost of taxes and reward fulfillment when preparing your budget.

More analysis

by Aeurelius

No. 6 Spending $15 billion on a program that would hire construction workers to help rehabilitate and refurbishing hundreds of thousands of foreclosed homes and businesses
This is TEMPORARY JOBS!!! and why in the hell is tax payers footing the bill for foreclosed homes? Are you a retarded or what?
No. 7 Creating the National Infrastructure Bank (capitalized with $10 billion), originally proposed in 2007, to help fund infrastructure via private and public capita
This does jack shit to create jobs. It is a slush fund.
No. 8 Creating a nationwide, interoperable wireless network for public safety, while expanding accessibility to high-speed wireless services
Private sector does internet better

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