Crowdfunding platforms like Kickstarter and Indiegogo have become popular avenues for entrepreneurs and creators to fund their projects. However, understanding the associated fees is crucial for planning a successful campaign.
Here’s a breakdown of the costs you should consider when using these platforms.
Kickstarter Fees
Platform Fee:
Kickstarter charges a 5% fee on the total funds raised if your project meets its funding goal. This fee is deducted from the total amount collected after the campaign ends.
Payment Processing Fees:
In addition to the platform fee, there are payment processing fees that typically range from 3% to 5% of the total amount pledged. For example, if you raise $10,000, you may pay between $300 and $500 in processing fees, plus an additional charge of $0.20 per pledge.
Micropledge Fee:
For pledges under $10, there is a discounted micropledge fee of 5% + $0.05 per pledge.
- Tax Implications: Funds raised through Kickstarter are generally considered taxable income. Depending on your location, you may need to pay sales tax, income tax, or other taxes on the funds received. Consulting with a tax professional is advisable to understand your obligations.
- Additional Costs: Beyond platform fees, creators should also factor in costs for campaign design, professional photography, videography, marketing, shipping rewards, and any staff or fulfillment costs associated with delivering your product to backers.
Indiegogo Fees
Platform Fee:
Indiegogo has a slightly different fee structure. They charge a 5% fee on funds raised for fixed funding campaigns and a 4% fee for flexible funding campaigns.
Payment Processing Fees:
Like Kickstarter, Indiegogo also charges payment processing fees which can range from 3% to 5%, depending on the payment method used.
InDemand Fees:
If you choose to continue raising funds after your campaign ends through Indiegogo’s InDemand feature, an additional fee of 5% will apply to those funds as well.
Tax Considerations:
Similar to Kickstarter, funds raised on Indiegogo are considered taxable income, so it’s important to keep track of your earnings and consult with a tax advisor.
Marketing and Fulfillment Costs:
Creators should also account for marketing expenses and fulfillment costs when calculating their overall budget for the campaign.
