Donation Receipts: 7 Things to Include on the Written Acknowledgment
After a donor gives to an organization, many ask how to make their contribution tax deductible. This is where donation receipts come into play. For the benefit of the 501(c)(3) nonprofit and the donor, it is important to provide a written acknowledgement of the donation. This is typically done in the form of a receipt, but other forms are acceptable as well.
If a donor wishes to claim a charitable contribution on their federal income tax return, it is their responsibility to obtain information regarding their contribution. If a 501(c)(3) nonprofit organization fails to provide a written receipt to the donor, it will incur no penalty. Thus, it is the sole responsibility of the donor to obtain this written acknowledgment. 501(c)(3) nonprofit organizations can help the donor by providing a receipt after receiving their contribution.
What Needs to be Included?
It is important to follow IRS guidelines when drafting a donation receipt. Without the right information, the IRS may not accept the contribution as tax deductible.
The IRS does not provide a standard format for donation receipts. The receipt may be in the form of a letter, postcard, or e-mail. The IRS, however, does specify what needs to be include in the written acknowledgment.
When drafting a donation receipt, a 501(c)(3) organization should include:
The name of the 501(c)(3) nonprofit;
The name of the donor;
The contribution date;
A description of non-cash donations (if applicable);
The donation amount;
Clearly state whether goods or services were exchanged for the donation; and
The value of the goods or services provided to the donor.
If the organization would like to include their address and EIN number, this may be a good idea. However, this is not required by the IRS.
Is a Donation Receipt Always Required?
If the donor's contribution is under $250, the donor may use a bank record or a receipt from the charitable donation as a written acknowledgement. [1] This bank record may be in the form of a cancelled check or bank statement. If the donation is $250 or more, the donor needs to obtain a donation receipt from the organization. [2]
What if the Organization Provides a Good or Service in Exchange for the Donation?
Some 501(c)(3) nonprofit organizations give donors a good in exchange for their donation. This is known as a quid pro quo contribution. Quid pro quo is a Latin term that literally translates to "this for that." The value of the good or service provided to the donor may affect the tax deductibility of the donation. [3]
A common example of this when donors purchase a seat to an organization's gala or event. The donor, or attendee, may pay an amount in exchange for a nice dinner and drinks/ Because the attendee is receiving a benefit for their donation, this may affect the cost of their tax deduction. If the cost to attend the gala or event was $150 and the cost of the dinner, paid for by the organization, is $50, then $100 of the ticket price is tax deductible.
What if I Received a Non-Cash Donation?
Some organizations receive goods as a donation to their 501(c)(3) nonprofit. If this is the case, the donation receipt must include a description of the item or goods donated. To write it off as tax deductible, the donor must include the fair market value of the donation on the receipt. [4] By law, the 501(c)(3) nonprofit organization is not allowed to determine this value. [5] Rather, this is the responsibility of the donor.
To determine the fair market value of a donated good and to learn more about in-kind donations, click here.
Disclaimer
This post is for informational purposes only. Contact a licensed attorney if you have any questions regarding donation receipts and what they need to include in order to be tax deductible for the donation.
Sources
[1] I.R.C. §1.170A-13 (2003).
[2] Id.
[3] I.R.C. §1.6115-1 (2003).
[4] I.R.C. §1.170A-1(c)(1) (2003).
[5] Id.
