You know donation receipts are important, but maybe you don’t understand why. Keep reading to learn why they matter, what you need to include, and how to automate them.
Join the fundraising movement! Join the fundraising movement!Sending a donation receipt isn’t just a nice gesture. In many cases, it’s required.
Donation receipts help meet IRS requirements, track donations, and build stronger relationships with donors while maximizing engagement.
In this article, I’ll walk you through everything you need to know about nonprofit donation receipts, what’s required, and how to automate them.
A donation receipt is a formal acknowledgement sent to a donor to confirm the receipt of a donation.
At its core, a donation receipt gives a donor peace of mind that their donation has made it to the intended recipient. But it also shares important information that is required if your organization falls under certain IRS tax-exempt designations.
And, of course, it’s an important step for building a relationship of trust and accountability with your donors.
A good rule of thumb is to send donation receipts within 24 to 48 hours of receiving a donation. Many nonprofits manage this by automating donation receipts for online donations. More on how to do that below!
Sending donation receipts ASAP meets your donors’ expectations for prompt acknowledgement. It also helps improve first-time donor retention.
There are a few types of donation receipts you’ll need to create. These include:
Let’s take a look at what information is required for your donation receipt.
Tax-exempt nonprofits are required to provide donation receipts for the following giving situations, according to IRS Publication 1771:
Note: If a donor has an annual membership with your nonprofit organization, they don’t technically need a receipt if the annual cost is $75 or less and goods or services were provided in exchange.
While these are the situations where a donation receipt is strictly required, it’s good practice to send a detailed receipt for donations of every size.
Here’s what U.S. nonprofits are required to include in their donation receipts:
If your organization provides intangible religious benefits, be sure to include a statement like, “The organization provided intangible religious benefits or services to the donor.”
Learn more about these requirements here.
Include your physical mailing address and Employer Identification Number (EIN) to confirm your tax-exempt status. Although not required, donors will need to provide this information with their taxes, so you’re saving them the effort of looking it up.
Pro tip: Be careful with year-end giving, when a donor could mail a check on the last day of December that you won’t receive until January. List the December date (the date the check was postmarked) on the receipt to ensure your donor has no issues come tax season.
There are different rules to follow on a donation receipt depending on where you live, so it’s best to go directly to your government’s website to check for accurate information, especially since rules and regulations can change.
Let’s take a closer look at two types of donation receipts that trip up nonprofits.
Let’s say a wealthy donor chooses to give your school ten computers as an in-kind donation – meaning, instead of giving you the cash to buy the computers yourself, the donor provides them directly.
In-kind donations can also include situations such as a lawyer providing a pro bono consultation or an artist painting a mural on your building.
Sending donation receipts for in-kind donations is crucial. But many nonprofits get caught up on just what to include in those receipts.
Here are some guidelines for completing in-kind donation receipts:
So in the example above, it would be the responsibility of the donor to document how much they spent on those ten computers if they wish to deduct that amount from their taxes.
A yearly receipt shows a consolidated outline of every gift given, making tax reporting easy for donors. While not required, sending yearly donation receipts is a nice gesture for donors who have given often throughout the year.
Typically, you’ll want to choose a donation platform that makes this process seamless. Donorbox, for example, offers a quick and easy way to generate and send year-end receipts so you can cross this task off your list.
Worried you might miss something on your receipt? I’ve got you covered. Download this free Donation Receipt Template.
What isn’t a donation receipt? An acknowledgement letter.
While these two donor communications often go hand in hand, a formal donation receipt for tax purposes has different requirements than an informal acknowledgement letter.
Here’s a breakdown of how these documents differ:
| Donation Receipt | Acknowledgement Letter |
|---|---|
| Purpose: To provide clear details about a donation. Often used by donors to claim donations on their taxes. | Purpose: To show genuine appreciation for a donation and steward a stronger relationship with a donor. |
| Required for certain donations, but it’s a good practice to send to all donors. | Not required, but it’s a good practice to send to all donors. |
| Must include specific information. | No required information. |
| Sent 24 - 48 hours after a donation. | Sent ASAP after a donation, up to one week. |
Nonprofits sometimes use these terms interchangeably. While they’re both important, they ultimately serve different functions.
As I mentioned above, most nonprofits stay on top of their donation receipt timing by automating receipts for all digital donations using a platform like Donorbox.
With Donorbox, you can fully customize your donation receipt text. Once a donation comes in through your Donorbox donation form, your donor will receive the receipt automatically.
Here’s how to create and automate a 501(c)(3)-compliant receipt with Donorbox:
You can also access general receipt settings on your Donorbox account under “Engage.”
From here, you can set a “reply to” email address in case the donor wants to reply to the donation receipt email, improving the overall donor experience.
Not all donation receipt software options are alike. Look for one that meets the following criteria:
Donorbox offers all of these features and more. Learn more about Donorbox’s receipt features here.
Without the right tool, donation receipts can be confusing and time-consuming. But they’re an important part of building a relationship of trust and transparency with your donors.
Familiarize yourself with your country’s donation receipt requirements. Then, invest in the right fundraising tools and software, like Donorbox, to make the process easier and free up your time for more important fundraising tasks.
Sign up today to get started.
Disclaimer: By sharing this information, we do not intend to provide legal, tax, or accounting advice, or to address specific situations. This article is intended to provide generalized financial information designed to educate a broad segment of the public. Please consult with your legal or tax advisor to supplement and verify what you learn here.
Qualified, tax-exempt organizations are required to provide a donation receipt for any contribution of $250 or more before a donor can claim a deduction on their taxes. Similarly, donation receipts are required if goods or services were exchanged for the donation and if a donor has requested a receipt.
No, you do not need a formal donation receipt for any donations under $250 as long as no goods or services have been exchanged (which is called a quid pro quo donation). You do need to have a reliable record of the donation, such as a bank statement.
Ilma is a content writer with over eight years of experience, specializing in nonprofits and social impact, marketing, language, and psychology. She draws on years of volunteering in the nonprofit sector to craft thoughtful, research-informed pieces. Ilma is also a therapist passionate about mental health and often weaves this perspective into her writing.
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