The month of April has been a tough one for many of us. The tragedy involving the bus crash of the Humboldt Broncos hit particularly close to home for our family, for a few reasons, not the least of which is that my son, Win, plays junior hockey and has spent countless hours on a bus over the past three years. Then there’s the Toronto van attack this week, which left another community in shock and many families fractured.

Canadians, and many foreigners, have demonstrated their support for those most directly affected by these events by raising funds through crowdfunding sites such as Over $15-million was raised for the Humboldt victims alone, and campaigns have been set up for victims of the Toronto van incident. I was contacted this week by a family who is receiving a meaningful sum from this generosity of so many. Here’s the question they asked: Is the amount they receive taxable? I thought I’d address this today, along with some comments about crowdfunding in general.

Tax-free windfalls

In the case of the surviving victims and families of the Humboldt accident and Toronto van attack, the amounts received through GoFundMe or other crowd-funding sources should be considered a “windfall,” and windfalls are tax-free.

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Based on a court decision, The Queen v. Cranswick (1982), the factors that indicate an amount is a “windfall” include: The individual had no enforceable claim to the payment, made no organized effort to receive the payment, neither sought nor solicited the payment, had no customary or specific expectation to receive the payment, had no reason to expect the payment would recur, the payment was from a source that is not a customary source of income for the individual, the payment was not in consideration for or in recognition of services or property provided by them, and the payment was not earned by the person as a result of any activity or pursuit of gain carried on by them. Whew, that’s a mouthful.

Based on the criteria above, it’s not clear that amounts raised through crowdfunding are tax-free if you’re raising the money for your own benefit – for any reason. If you seek or solicit the payment, and make an organized effort to receive the payment, any amount you receive might not be counted as a “windfall,” and could be taxable. So, if you’re thinking of using a crowdfunding platform to raise money for yourself, you’d be wise to allow someone else to start the campaign on your behalf – and hope that will do the trick.

It was a wonderful gesture for others to step up and create funding campaigns for the victims of the Humboldt tragedy, and this week’s Toronto van attack – and the fact that it was not the victims that set up these campaigns for their own benefit should ensure the amounts are tax-free for the recipients.

Taxable amounts

I should mention that if some of the funds raised for these families are used to purchase an annuity for them (which can ensure a long-term income), the principal amount, or capital invested, in the annuity would be tax-free, but the interest portion of each annuity payment would be taxable.

Say, for example, that a family has $500,000 set aside for them from the generosity of others. If the $500,000 were given to them today, that should be a tax-free windfall for them. If instead the $500,000 was used to purchase an annuity, it would provide an income of $19,870 a year for life (assuming an annuity on the joint lives of a married couple, age 50), of which $7,490 would be taxable each year since it represents the interest portion of the annuity, and the other $12,380 would be a tax-free payment of capital to them each year. If instead the annuity were purchased for a single person, age 20 (say, one of the surviving Humboldt hockey players), it would provide an annual income of $16,550 – $8,320 of which would be taxable each year.

As an aside, I do hope that the committee charged with the task of dispersing the funds to each family affected by the Humboldt Broncos’ accident considers each family’s situation one by one. Not all circumstances are the same. Some may benefit from a lump-sum payment today, while others may benefit from an annuity that guarantees an income for life, and others may benefit from a combination of these. A conversation with each family makes sense. Nevertheless, let’s hope that some lump-sum is paid to the families of either tragedy as soon as possible since I’m sure there are immediate needs.

A final note on crowdfunding: I’ve been talking about funding provided to individuals and families in need. What about businesses that use a crowdfunding campaign, perhaps to develop a product or undertake research? The taxman has said those amounts are taxable to the business if no equity in the business is issued to the contributors. (Click here for a previous article on crowdfunding.)

Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author, and co-founder and CEO of Our Family Office Inc. He can be reached at