When a donor contributes to your not-for-profit organization, they’re making an investment in your mission. A well-crafted donation receipt not only ensures that your donors can claim their tax deduction but also serves as an opportunity to express gratitude and reinforce their commitment to your cause.
In this blog, we’ll walk through the essential elements of a proper donation receipt and how you can make the most of this important communication tool.
Why Are Donation Receipts Important?
A donation receipt is more than just a formality, it’s a requirement for donors who wish to claim a tax deduction for their charitable contribution. The IRS has specific guidelines on what must be included in a valid donation receipt, and failing to comply can create challenges for both your organization and your donors.
To ensure compliance and strengthen donor relationships, every receipt should include the following elements:
The 4 Key Requirements for a Donation Receipt
1. Name of the Organization
This one is straightforward- your organization’s name must be clearly stated on the receipt. The easiest way to do this is by printing the receipt on your not-for-profit organization’s official letterhead. If you don’t have letterhead, simply including the organization’s name in the body of the letter will suffice.
2. Date the Donation Was Received
The donation receipt must include the date the contribution was made. This is critical because receipts need to be contemporaneous, meaning they should be issued around the same time as the donation. This ensures donors can use the receipt when filing their taxes for the corresponding year. The date can be included in the letterhead or within the body of the letter.
3. Type of Contribution
Not-for-profit organizations receive both cash and non-cash contributions, and the donation receipt must specify which type was received.
· For cash contributions: The letter should state the exact amount donated.
· For non-cash contributions: The receipt should include a description of the item(s) donated but should not assign a dollar value. It is up to the donor to determine the fair market value of their donation for tax purposes.
4. Statement Regarding Goods or Services Provided
This is an essential part of the receipt, as it clarifies how much of the contribution is tax-deductible. There are three possible statements to include:
· Option 1: No goods or services were provided. Used when a donor gives purely out of generosity without receiving anything in return.
· Option 2: A description and estimate of goods or services received. This is common for fundraising events where donors receive something of value in exchange for their donation. Example: If a fundraising dinner ticket costs $100 and the meal is valued at $25, the receipt should state that the value of goods provided was $25, making the tax-deductible portion $75.
· Option 3: Intangible religious benefits were provided. Used primarily by religious organizations to indicate that any benefits received were spiritual in nature rather than material goods or services.
Don’t Forget the Thank You!
While a donation receipt serves a practical purpose, it’s also a chance to reinforce the impact of your donor’s generosity. A simple thank you can go a long way in building lasting donor relationships. Acknowledge their contribution and express gratitude for their support. It makes a difference!
Summary: What to Include in a Donation Receipt
· Name of the Organization
· Date the Donation Was Received
· Type of Contribution
· Statement on Goods or Services Provided
· A Thank You
By ensuring your donation receipts include these elements, your not-for-profit organization will remain compliant with IRS guidelines while also maintaining positive and professional donor communications.
Looking for more not-for-profit organization financial guidance? Stay tuned for future blog posts, where we’ll share more examples and best practices to help your organization succeed!
At De Boer, Baumann & Company, we specialize in not-for-profit organization financial services and compliance. If you need assistance with donor receipts, tax regulations, or nonprofit accounting, we’re here to help!