Hospitals and nonprofits have begun expanding their fundraising efforts beyond the traditional reliance on a board of directors out to the wider reach of the Internet. But medical crowdfunding is taking another direction as well. “There is a major growing trend of people using the Internet to raise money for medical events,” says Frutkin Law Firm founder Jonathan Frutkin, a local attorney recognized nationally for his expertise in crowdfunding and author of Equity Crowdfunding: Transforming Customers into Loyal Owners.
Describing it as a natural extension of social media, Frutkin notes, “Almost all medical crowdfunding is done by someone close to the family. Their reason for giving is, they know the person.” Very little of the money, however, goes to actual medical bills. While most people have insurance for the medical treatments, Frutkin observes, major medical catastrophes affect everything else. For instance, they no longer have income to pay the mortgage, or may be suffering Stage 4 cancer and want their children to fly out for a last visit. “The perception is, it’s used for medical expenses, but the reality is, it is mostly used for living expenses when a medical catastrophe happens,” Frutkin says.
Individual crowdfunding is unlikely to have a tax consequence. It is classified as a gift, which, unless it’s a large amount, is not included as either income or deduction, Frutkin explains. This is unlike medical crowdfunding donations to nonprofit organizations, which donors expect to claim as a tax deduction and which therefore requires that the organization have proper tax-exempt certification.