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I'm an individual and not a part of any nonprofit organization. What, if any, tax implications are there for donationware in the US (as a recipient of funds)? The product would be software and/or screencasts.

  • The wiki entry for donationware doesn't address the tax issue. Good history, and example of the process. – JoeTaxpayer May 17 '12 at 0:33
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If you're not a recognized non-profit organization then your income is taxable as earned income, or hobby income, depending on the circumstances. Some would say it may be classified as a "gift", but I would argue that to be a dangerous proposition, and would advise against it.

  • But, they'd be wrong. Max may be a nice guy, but I don't know him (i.e. we are not friends). Since there's a product involved, even if the payment is optional, it's taxable. The flip side is it would be really interesting if every business decided to "pay what you wish, if you wish" and then claim no income. – JoeTaxpayer May 16 '12 at 22:59
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    @JoeTaxpayer that's why I said I would advise against it, because that would be wrong:) But haven't you heard of "tax advisors" who get paid to tell the customers what the customers want to hear? I'm sure you have... They call you later to help with audits... – littleadv May 16 '12 at 23:08
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    I +1 you, and backed up your answer. My opinion is such advisors should lose their credentials, and serve jail time. The tax code is tough enough without these folk. – JoeTaxpayer May 16 '12 at 23:22

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