Maintaining good donor relations should be a priority for every charity. Ensuring donors are able to take a tax deduction for their donations is fundamental to maintaining good relations.
Donors must have a record of their charitable contributions to claim a tax deduction. The record can be a bank record or a written acknowledgement from the charity. For any single donation of $250 or more, a bank record is not sufficient; the donor must have a contemporaneous, written acknowledgement from the charity.
For a single donation or $250 or more, a charity’s written acknowledgment must contain the following information:
- Name of the organization
- Amount of cash contribution
- Description (but not value) of non-cash contribution
- Statement that no goods or services were provided by the organization, if that is the case
- Description and good faith estimate of the value of goods or services, if any, that organization provided in return for the contribution
- Statement that goods or services, if any, that were provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case
If an individual makes multiple donations over $250 in any given year, the charity can issue separate written acknowledgements for each donation or can summarize all the donations in a single document. Charities should strive to issue the written acknowledgments by January 31st of each year, if not sooner.
To be timely, a written acknowledgment must be issued before the taxpayer’s tax return is due or filed, whichever is earlier.
Token gifts to donors, such as coffee mugs, calendars, and t-shirts, are an exception to item #4, and need not be described or valued in a written acknowledgement.
The requirements for contemporary written acknowledgement are strictly enforced. Recently, an entity lost a charitable deduction for a conservation easement valued at $64 million, because the written acknowledgment it received did not contain the statement that no goods or services were provided by the organization. 15 West 17th Street LLC, 147 TC No. 19 (2016).
Protect your donor relations by developing forms and procedures to ensure your donors are properly acknowledged and given the information they need to deduct their contributions.
Note: These rules do not apply for donations of autos, boats, and planes. See IRS Publication 4303 (PDF) » for more information on such gifts.