Sometimes your fund-raising efforts will be so successful that you may wonder if your group owes anything to the government in taxes. For the most part, fund-raising is not considered part of your group's mission; it is just a means to an end. After all, your group's mission is to encourage homeschooling, not to sell ads, pizza, or other products. 

The Internal Revenue Service calls the money you raise "unrelated business income," meaning it is money collected in a trade or business that is not related to your primary mission. The IRS does assess a tax on unrelated business income; it is called the Unrelated Business Income Tax or UBIT. The purpose of this tax is to prevent nonprofit, tax-exempt organizations from having an unfair advantage over the for-profit marketplace. The best example is a gift shop in a nonprofit hospital. The income from a gift shop is not related to the hospital's primary purpose of giving medical treatment, so the profits from the gift shop are taxed. Fortunately the IRS has several exceptions to the UBIT tax: 

  • A $1,000 threshold allows that the first $1,000 in profit from an unrelated business will not be taxed.
  • If the fund-raiser (or unrelated business) is run by volunteer efforts (i.e., no paid staff) then the proceeds are not taxed.
  • If the fund-raiser is not regularly carried on, such as a once-a-year spaghetti supper, then the proceeds are not subject to UBIT.
  • If you are selling donated items, like in a garage sale, the income raised is not taxed.

The rules regarding UBIT are complex. You can read more about UBIT in IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations (www.irs.gov/pub/irs-pdf/p598.pdf). 

Your state may have reporting requirements if you are representing yourself to the public as a nonprofit organization. In my home state of Ohio, groups that do public fund-raising must file a charity registration. One year, my co-op sold candles door to door and had to file a seven-page financial report with Ohio's attorney general's office. That report was such a nuisance (and the fund-raiser was so much work) that we no longer do sales to the public. Investigate what your state requires of groups that conduct fund-raisers. This website documents nonprofit reporting requirements by state: www.HurwitAssociates.com

Other Ideas 

A homeschool group in Ohio was paid $1,000 for cleaning a fairground. This was not really a fund-raiser. It was work for hire, but because the workers were all volunteers and the money went to the homeschool group, no one claimed it as income or paid taxes on it. I wouldn't say their labor was easy, but they raised a significant amount of money in a single day. 

A Texas homeschool group sponsored a group garage sale. Families brought donated items to sell and volunteered their time during the sale. Also consider hosting a homeschool curriculum sale. Your organization could charge a small fee to the buyers and sellers and allow the sellers to keep their own sale proceeds. 

For more ideas visit www.FundraisingMom.com, Suzanne Wouk's website. She has a lot of experience with different fund-raisers and specializes in fund-raisers your group can conduct via the Internet.  

Raising money for your homeschool group may never be effortless, but these ideas have been tried and tested by several homeschool groups and found to be quite easy! They take minimal investments of time, organization, and energy. After all, you have better things to do with your time—like homeschooling. I wish you the best of success in your fund-raising efforts! 

*This article published Dec. 8, 2009


Carol L. Topp, CPA is a homeschooling mother of two daughters and is the author of Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out. She enjoys using her accounting skills to help homeschool organizations, and she enjoys serving on her homeschool co-op board. Carol's website address is www.HomeschoolCPA.com

Copyright 2008. Originally appeared in The Old Schoolhouse Magazine, Winter 2008/09. Used with permission. Visit them at www.TheHomeschoolMagazine.com. For all your homeschool curriculum needs visit the Schoolhouse Store.