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Do Donations Need to be Taxed? Information for Private Individuals

Are you allowed to collect private donations and are they tax-free? We explain the most important rules and provide helpful information on gift tax and allowances.

Redaktion GoodCrowd.org

Reading time: 6 min

Updated: 27.03.2025

Note: We cannot provide legal advice on this matter. Therefore, this article does not constitute binding legal or tax advice. Instead, we aim to provide basic information as a general guide. We recommend consulting a tax advisor or lawyer if you have specific questions. All figures are from December 2024, please verify them as needed.

Collecting donations is a wonderful way to support people in difficult situations or realize heartfelt projects. Platforms like GoodCrowd.org offer you a simple and transparent way to do this. However, before you start, you should familiarize yourself with the legal and tax basics. One question that keeps coming up is: As a private individual, do I need to pay taxes on received donations? We'll explain what you need to know.

Am I Allowed to Collect Donations as a Private Individual?

Yes, collecting donations is permitted as a private individual – provided you follow a few important rules:

Honesty and transparency: Communicate clearly what the money will be used for, and ensure that the donated funds are used exactly for this purpose. Fraud or false information is not allowed on GoodCrowd.org and has legal consequences.
No quid pro quo: On GoodCrowd.org, donations can only be collected without offering anything in return. This means supporters cannot receive any "rewards" such as products or services. This is because legally, donations on GoodCrowd.org are typically considered gifts. If rewards are given out, it no longer qualifies as a gift.

Are Received Donations Tax-Free and When Must Donations be Taxed?

Money that you collect and receive on GoodCrowd.org is marked as donations. However, in terms of tax law, these are typically considered gifts. In Germany, there is a tax-free allowance for gifts of 20,000 euros per supporter within ten years, provided there is no family relationship. For family relationships, the amount is even higher: Spouses can gift up to 500,000 euros tax-free, for example.

You can find a good overview of the tax-free allowances for various family relationships at Finanztip. If the sum of contributions from one person exceeds this allowance, gift tax usually needs to be paid. Gift tax is a separate type of tax with three different tax classes. The tax rates range between 7 and 50 percent, depending on the amount and the relationship between the giving and receiving person.

Why Even Large Donation Amounts Usually Remain Tax-Free

Do you have a donation goal over 20,000 euros and are now worried about high taxes? We'll explain with an example why even large donation amounts can remain tax-free. Imagine the following situation:

The beloved husband and father of the Mustermann family has suddenly passed away. The father was the main earner, and besides high funeral costs, the family is now left alone with ongoing costs for insurance, money for the three children, and interest on a loan. The family decides to start a donation campaign - the goal: 40,000 euros. Within a few weeks, the family has collected the money. In total, 1,500 supporters have donated money. The highest donation amount from a single person is 2,000 euros.

In this example, the entire donation amount remains tax-free because the sum of 40,000 euros is distributed across many individual donors. The sum of contributions from each individual supporter remains well below the tax-free allowance of 20,000 euros per person, even for the highest single donation.

This means that even if you plan to collect amounts higher than 20,000 euros, it should not be tax-relevant in most cases. Because only if the sum of all money from a single person exceeds 20,000 euros within 10 years will taxes become due.

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What If I Collect Money for Another Person?

We've now extensively explained how the tax-free allowance is divided when you collect money for yourself. But what if you collect money for another person and then pass it on?

Let's take the Mustermann family example again. But in this case, a neighbor starts the donation campaign for the Mustermann family because she wants to support the family during this difficult time. The neighbor collects the money in the name of the Mustermann family and then passes it on. The neighbor as campaign starter doesn't pay gift tax since the total amount is again distributed across many different supporters.

However, when the neighbor wants to hand over the collected 40,000 euros to the Mustermann family, gift tax might apply. This is because the neighbor, as a friend of the family, also has "only" a tax-free allowance of 20,000 euros for a gift. The total amount she's giving at once is above this.

So if you collect a large amount for others, it's advisable to consult an expert like a tax advisor to understand potential tax implications precisely.

What Happens If the Tax-Free Allowance is Exceeded?

If the gift tax allowance of 20,000 euros per person within ten years is exceeded, gift tax may apply. Let's look at the Mustermann family's neighbor example again:

She hands over 40,000 euros to the family, specifically to Mrs. Mustermann. Because they are friends but not related, the tax-free allowance is 20,000 euros. Up to this amount, no money needs to be taxed. For the remaining sum, a tax of 30% applies. In this example, this specifically means:

40,000 euros donation amount - 20,000 euros tax-free allowance = 20,000 remaining amount
20,000 euros remaining amount * 30% gift tax = 6,000 euros taxes
40,000 euros donation amount - 6,000 taxes = 34,000 euros

You can find the exact tax rates at the Lohnsteuerhilfeverein. At Finanztip, you'll also find a practical gift tax calculator.

How Can I Avoid Legal and Tax Risks When Collecting Private Donations?

Consider before starting the campaign how much money you want to collect, what it will be used for, and how it should be handed over. If you're collecting a larger sum for a friend, it might make more sense for that person to create the campaign themselves while you help with writing the text and sharing the campaign, rather than collecting under your name.

Or it might make sense to pay expenses directly with the money instead of first handing over a larger sum to another person. In all cases, it's best to get advice from an expert.

To stay on the safe side, we also recommend:

Clear communication: Describe exactly what the money will be used for on your donation campaign. We have compiled additional tips for good text for you.
Documentation: Keep detailed records of the amount and use of received donations.
Bank transfers instead of cash: We recommend transferring collected funds or using them via bank transfer, so you always have proof of how the funds were used.
Consider using a separate account: If possible, set up a dedicated account for your donations to keep track of incoming amounts.
Tax consultation: Consult a tax advisor if you're managing larger donation campaigns. Experts can help you understand your obligations precisely.

What Applies to Non-Profit Organizations?

Different rules apply when you collect donations for a non-profit organization. It's important that the organization is recognized as non-profit by the tax office and has a valid exemption notice. In this case, the donations are usually tax-free – provided they are used exclusively for tax-privileged purposes.

Additionally, non-profit organizations can issue donation receipts. With the receipt, donors can then deduct their donation from their taxes. Private individuals cannot issue donation receipts since legally speaking, it's not a donation but a gift.

You can find more information about collecting donations for organizations at our sister organization betterplace.org.

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Most Frequently Asked Questions and Answers About Tax Issues When Collecting Donations as a Private Individual

As mentioned, you should always consult an expert with questions. Since we cannot provide legal advice, we are only providing basic information here as a general guide.

Am I allowed to collect donations as a private individual?

Yes, as a private individual, you may collect donations as long as you communicate honestly and transparently what the funds will be used for and don't offer anything in return.

Do received donations need to be taxed?

Donations are legally considered gifts. As long as the tax-free allowances of 20,000 euros per supporter within 10 years are not exceeded, they are tax-free.

What is the tax-free allowance for gifts?

The tax-free allowance is 20,000 euros per person over 10 years; for family relationships, this amount can be significantly higher.

How can I avoid tax risks when collecting donations?

Document all donations and their uses, use bank transfers instead of cash, and consult a tax advisor.

Why do high amounts in crowdfunding campaigns often remain tax-free?

High amounts are often contributed by many supporters, so individual donations remain under the tax-free allowance and no tax liability arises.

Do I need to pay gift tax if I collect donations for others?

When passing on large amounts, gift taxes may apply, as the tax-free allowance of 20,000 euros also applies to you.

What happens if the tax-free allowance is exceeded?

If the tax-free allowance of 20,000 euros per supporter is exceeded, gift tax applies, whose amount depends on the relationship and the amount.

What rules apply to donations to non-profit organizations?

Donations to non-profit organizations are tax-free if the organization is recognized by the tax office and the funds are used for tax-privileged purposes. We recommend our sister organization betterplace.org for this.

Can I issue donation receipts as a private individual?

No, only non-profit organizations can issue donation receipts. Private individuals collect gifts in legal terms, not donations.