As a nonprofit staffer or executive, you know that keeping your finances in order is critical to your success. But what about your donors? Do they understand how their donations are being used?
One way to ensure transparency and clarity for your donors is to provide receipts detailing their donations. In this article, we will explain what you need to know about nonprofit donor receipts. We’ll cover what information should be included on them, when they should be sent out, and how you can utilize membership management software to automate and speed up the process of issuing donor receipts.
What are Nonprofit Donor Receipts?
Nonprofit donor receipts are written notes issued to a qualified donor after they have made a donation to an organization. These notes serve as an acknowledgement that the gift – monetary or non-monetary – was received by the nonprofit.
In the US, all types of registered 501(c)(3) charitable organizations and registered 501(c) non-profits must issue a receipt for any donations of $250 or more.
Why do Donor Receipts Matter?
Donor receipts are essential not just for financial record management, but to keep donors happy as well. Here are three reasons why donors receipts are important:
1. Donor receipts help non-profits keep track of financial records and donors’ giving history
Keeping a record of all your monetary and non-monetary donations will help you assess trends in your donors’ behavior as well as let you monitor whether you’re hitting your KPIs for the year. With the right donation form system or membership software, you can automate recording donations and sending receipts.
2. Donor receipts improve donor relations
Imagine you found a charity that promises to send a hygiene kit to a child in a rural community for every $10 donated. This sparked something in you as a donor because you spent a week volunteering in a community with limited potable water. So you donated $50 to send kits to five kids. But you never heard back from the organization. How do you know if your money was actually received? Or if it actually went to those in need?
A simple acknowledgment receipt will give donors the peace of mind that their money was received by the organization and will be sent to the intended beneficiaries. When donors have a clear idea of where and how their money was spent – especially if they see the beneficiaries who benefit from the gifts – they become more inclined to make a repeat donation.
3. Donor receipts help donors file for tax deductions
Most countries incentivize their citizens to make charitable donations by offering tax deductions for gifts made to non-profits. By issuing a receipt right away, you make it easier for your donors to have the information they need to file their tax return with the government.
When are Nonprofits Required to Issue Donor Receipts?
In the US, donors can usually claim tax deductions on monetary contributions of less than $250 without a receipt, but the donor has to provide a bank record or a payroll-deduction record to claim the donation as a tax deduction. For contributions worth $250 or more, the IRS advises that the following information should be contained within the written acknowledgement:
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; and
Statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.
When Should You Issue a Donor Receipt?
Your nonprofit organization should always issue a donation receipt the moment it receives a gift. This will give your donors the assurance that their money is going to its intended purpose. Issuing a receipt right away also makes donors feel more engaged and have more trust in your organization’s capacity to manage their contributions. It shows that you are a well-oiled machine that is a good steward of your philanthropy. Organizations with online donation forms can easily automate sending receipts.
Charities can also issue donation receipts in one push at the end of the year. This approach is a possibility for smaller non-profits that don’t yet have a membership or donor management system. It’s not recommended though as donors may have concerns if their contributions aren’t acknowledged more quickly.
How are Donor Receipts Issued?
There are many ways to go about issuing donor receipts, from manually sending postcards or letters to setting up automated emails.
Most non-profits have gravitated towards automated email responses and make use of membership management software or a donation platform to do so. Compared to snail mail, automated email receipts are operationally cheaper, less time-consuming and minimize the risk for human error.
Here’s how a software program can typically make the donation receipt issuing process easier for your organization:
- A donor will make a payment online by credit card through your donation form.
- The software logs the information in the database, then sends the receipt to the donor.
- The receipt should list the dollar amount donated, your non-profit’s name and address, your logo, and a custom message. You will likely need to do some legwork up front to set up the receipt template to look just how you want it to appear.
- The donor receives a branded receipt in their email, complete with a message of thanks.
What are the Different Types of Nonprofit Donor Receipts?
Donor receipts can be categorized into different subgroups, depending on the kind of gift given by the donor. These include:
Charitable donation receipts
This is a written acknowledgement (either via physical letter or email) issued to notify a donor that their charitable donation has been received by the non-profit. This receipt is issued to donors who give monetary gifts.
In-kind donation receipts
This receipt is issued to donors who offer in-kind donations, or goods or services other than money. In-kind donations are not always tax deductible for the provider. For example, in kind services are not deductible, but the hard costs of providing a service can be. For example, if a corporation is paying employees while having them volunteer for a charity, the business can deduct the payroll cost that was incurred. However, if a web designer creates a free website for a nonprofit, the time spent is not deductible.
Even if the deductibility is in question, a nonprofit can still issue a receipt. This type of receipt typically includes the donor’s personal information, the date the gift was given, and a detailed description of the gift, along with its estimated cost. You should contact a tax expert in regard to the deductibility of in kind donations. The receipt should indicate whether or not goods or services were provided by the nonprofit organization in exchange for the donation.
Stock gift donation receipt
Corporations and individuals can offer stock shares as gifts to non-profits. Along with the nonprofit’s name and address, receipts for stock gifts should indicate the date the stock was received, the number of shares, the ticker symbol and the corporation’s name. The monetary value of the shares should not be indicated as nonprofits are not in the business of valuing stocks. The receipt should indicate whether or not goods or services were provided by the nonprofit organization in exchange for the donation.
Silent auction receipt
This receipt is given to those who attend silent auctions and made a successful purchase at the event. This receipt includes the name and date of the event, the name of the organization, the name of the attendee, and the name and value of the item/s purchased.
End-of-year donation receipts
These are receipts issued at the end of each year, indicating the total amount given in monetary and in-kind donations. This receipt will help donors account for their tax deductions.
How to Present Your Donation Receipts
Here is everything you should include in a non-profit donor receipt:
- The donor’s legal name;
- The name of the non-profit organization which the donor sent their gift to;
- The date the donation was sent;
- The amount received (or a description and estimated value of an in-kind gift);
- A statement clarifying that no goods or services were provided in return for the donation or a description of goods or services provided in return, if applicable.
- It’s a good idea to include the charity’s address and EIN (Employer ID Number) which is issued by the IRS.
Sample Donation Receipt
Want a more concrete example of what a donation receipt should look like? Here’s a template you can follow:
One Planet, One Home Foundation
25 Main Street
Dear Mr. Smith,
Thank you for your generous donation of $200 to the Lights for Life Campaign. 100% of your donation will go towards providing solar-powered lights made out of recycled materials to our partner communities in Ethiopia. The amount you have given will make a significant impact in the lives of many, as nearly 80% of Ethiopians still live without access to sustainable electricity.
One Planet, One Home is a registered 501(c)3 non-profit organization. Therefore, your gift may be tax deductible. No goods or services were provided in return for the donation.
Below is a breakdown of your donation.
Francis J. Smith
11 Greenland Ave.
Gainesville, Florida 32601
December 10, 2021
One Planet, One Home
Dos and Don’ts When Presenting Donor Receipts
Here are some best practices and common mistakes to avoid when issuing donor receipts:
Do say ‘thank you’
Your receipt is more than just a piece of paper or an electronic message acknowledging a donation, it’s a way to reach out to donors and make them feel appreciated for taking the time and effort to help out. Use this opportunity to build a good relationship with your donors, starting with a simple and heartfelt thanks.
Do share the impact of the donation
As mentioned, donors are more inclined to make donations when they know exactly where their money is going. Make it a point to discuss who is being helped by the gift and in what way.
Do take advantage of automations
These days, there are tons of software programs out there that can help you create templates and automatically send receipts once donations come into your account. Automated receipts aren’t just efficient, they’re also far more professional, creating a consistent look and feel to all your receipts.
Don’t write cold and impersonal letters
Don’t just send a generic and impersonal note. At the very least, include the donor’s name. This doesn’t just make the donor feel personally acknowledged, it also allows them to confirm that they made the correct donation.
Don’t state that the gift is “100% tax deductible”
Tax deductions on donations will still depend on the eligibility of the donor. Instead, state that their contributions may be deductible, should they be considered eligible.
The Bottom Line
The donor receipt is a crucial part of the donation process. Issuing receipts allows non-profits to foster better relationships with their donors, while giving their donors the opportunity to gain tax deductions for their charitable gifts. We hope that this article has given you some insight into how to issue charitable donations receipts for your nonprofit, as well as what information should be contained within them.
Nonprofit Donor Receipts FAQs
How do I write a receipt for a donation?
Donor receipts must include the following information: the donor’s name, the non-profit’s name, the date the gift was received, the amount received, and a statement clarifying whether goods or services were provided in return. Also include your EIN number.
Are donation receipts worth it?
Yes! They are beneficial to both the non-profit and the donors.
What donation amount needs a receipt?
In the US, monetary donations of over $250 require receipts in order to be considered tax deductible. But it’s always a good idea to issue receipts for smaller amounts.
How do I write a donor acknowledgement letter?
Writing a donor acknowledgment letter involves giving thanks to the donor for their gifts, acknowledging the value of the donation, and discussing the how the gift will help beneficiaries, and indicating whether the donation can be considered tax deductible.