Understanding fee coverage and tax deductibility

How fee coverage works in Fundraise Up

It's important to understand that fee coverage doesn't eliminate fees for the organization. Instead, it increases the donation to cover these fees. Here's how it works:

1. Original Donation Amount: The supporter enters their intended donation amount on the donation form.
2. Cover Fees Option: The supporter is presented with an option to cover the platform and payment processing fees associated with their donation.
3. Increased Donation Amount: If the donor checks the "Cover transaction costs" box, Fundraise Up automatically calculates the additional amount required to cover the fees based on the original donation amount and the applicable fee rates.
4. Total Donation: The supporter’s total donation amount is increased by the calculated fee coverage amount, ensuring that the organization receives the full intended donation after fees are deducted.

Example breakdown

Here's an example of how fee coverage works:

• Original intended donation: $100.00 USD
• Total amount charged to supporter (with fee coverage): $108.00 USD

Breakdown:

• Platform fee: $4.32 USD
• Payment processing fee: $3.43 USD
• Total fees: $7.75 USD
• Payout amount to organization: $100.25 USD

In this scenario:

• The supporter's donation is increased by $8.00 to cover the fees.
• The organization still pays fees totaling $7.75.
• The organization receives $100.25, which is slightly more than the original $100 intended donation.

Tax deductibility of fee coverage

The tax deductibility of fee coverage in Fundraise Up is straightforward:

If the donations made to your organization are generally tax-deductible, then the additional amount donated to cover fees will also be tax-deductible.

This means that when a donor chooses to cover fees, the entire total donation amount, including the original intended donation and the fee coverage amount, is eligible for a tax deduction, provided that your organization qualifies for tax-deductible contributions.