Lender accounts as tax-deductible donations

Discussion in 'Announcements' started by Julia Kurnia, Oct 30, 2013.

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  1. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

    Dear all,

    One lender wrote to us this week with an interesting suggestion: make it possible to receive tax deductions for credit uploaded to lending accounts by designating the funds as donations rather than withdrawable lender funds uploads.

    His reasoning was that he intended anyway to keep lending the funds in perpetuity, and the tax deduction he could receive by including the lending fund as a charitable donation would offset some of the costs of lending (transfer fees, currency fluctuations, and principal loss).

    Regular lending accounts are not tax-deductible because we offer the option to withdraw funds. Disabling this option for lenders who do not intend to use it would allow them to report their lender funds uploads as what they really are - charitable donations to a 501(c)(3) nonprofit - and receive a corresponding tax deduction which could help offset costs or be used for further lending.

    Such donation accounts would work exactly like regular lending accounts, with the lender controlling all lending activity as long as the account remains active. The only difference is that the withdraw option would not be included, and we will issue donation receipts for all amounts paid into the account, not just the optional donations to Zidisha's operating expenses.

    As we explore this idea, I'd like to invite feedback. Is it a feature many of you would use?


  2. K M

    K M Gold Member

    I would not use it as I'm not an American, but am not sure I would use it even if I were, as I do consider Zidisha as an investment rather then a charity (atleast in terms of the money I lend.) However, more options are always nice.
  3. Max

    Max Forum Member

    I'm not sure I personally would use it, but I think it's a great idea.
  4. russell

    russell Forum Member

    I am not american but if I was I would not use it.Without a chance to withdraw funds it would become a meaningless computer game.It would not matter if I made or lost money.If it did not matter anymore there would be no point and I would loose interest.However other people may like the idea and it would be good for them to have the choice.
    Texas likes this.
  5. Evelyn

    Evelyn Forum Member

    I would not use it.

    1. The amount of money that I have circulating to borrowers is more than I would donate to charity. I like the option of being able to withdraw it if I needed it in the future.

    2. Unless you itemize your deductions on your taxes you won't benefit anyway.

    Although some might like to be able to have their uploads count as donations, it has the potential to be confusing. Especially if someone suddenly wants to withdraw their money and then forgets that years ago they uploaded it as a charitable donation. I would think Zidisha would have to somehow make it very clear in the lender account every time they sign in that the credits are non-withdrawable and already marked as donations.

    It seems like it might also complicate the record keeping for Zidisha.
    Texas likes this.
  6. rdcmole

    rdcmole Forum Member

    I think that this is a very interesting option that could be attractive to some US based Zidisha members. The option to make "philanthropic loans" tax deductible would encourage me to make additional "loans". I would also be interested in the option to convert my current Zidisha loans in to donated loans that I had the ability to control.

  7. Michaela

    Michaela Forum Member


    Maybe, for someone wanting to make a donation which is then used to lend money to borrowers, you can propose a specific restricted fund. This will do what the lender thought to do, beside that it is not him to decide which borrower gets the money. And it is clear from the beginning that it has been donated.

    I don't think I would use this option, even if in my country it would probably also be classified as donation and could be deducted.
    I'm not completely sure if the tax authority would accept a donation were the donator remains the owner, even if he cannot withdraw the money.

    If you opt for the not-payback-option, it should also not possible to gift giftcards, because I could create a second account and gift the money there and withdraw it......
    OK, I'm Italian, we always think about how to shave taxes...
    I could make a donation of 1000 USD, gift it to my second account, withdraw it, donate it a second time, and have donations of USD 2000 to deduct in the tax declaration...... ☺☺☺

    Shehi likes this.
  8. K M

    K M Gold Member

    I believe Zidisha already has a fund that is used for donations specified as to be used to lend to borrowers. I've seen a lending account "Zidisha" filling out some loans!
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