A donor acknowledgment letter is one that acknowledges and thanks the donor for their gift. A good donor acknowledgment letter goes beyond just acknowledging the gift. In this article, we’ll look at the basics of donor acknowledgment letters: what you need to include, what you should include, and everything in between.
When someone feels compelled to support your nonprofit organization, it’s important that you properly acknowledge their generosity with a donation receipt and donor acknowledgment letter. Without these items, your donors might be left high and dry–and less willing to support your mission in the future. But what’s the difference?
In this article, we’ll look at the basics of donor acknowledgment letters and donation receipts: what you need to include, what you should include, and everything in between.
Read on to make sure your acknowledgment letters and donation receipts check all the right boxes.
Sometimes referred to as a donor thank-you letter, a donor acknowledgment letter is just what it sounds like—a letter that acknowledges the act of a donation. But a good donor acknowledgment letter goes beyond just acknowledging the gift.
The right letter should do the following:
Another important aspect of the donor acknowledgment process is sending an accurate donation receipt that provides all required information, like –
While a donation receipt is separate from your donor acknowledgment letter, nonprofits should send both of these items so donors have everything they need – and feel adequately acknowledged – after their donation.
For online donations, an email receipt is typically sent automatically (more on that later), and then a thank-you letter is mailed later on. When you receive an in-person donation, you may consider including the receipt with the mailed acknowledgment letter.
This is pretty straightforward—if you receive a donation of liquid money, then you’ve received a cash gift! Regardless of whether you get this contribution through a check, cash, or credit card, “cash” refers to the type of gift and not just the method of giving.
This means instead of getting money, someone donates goods or services to your organization. Usually, large businesses and corporations make these kinds of donations. An example would be a large grocery chain providing your organization with gift cards to purchase materials for a fundraising event.
When you receive donations through an online donation form on your website or a fundraising page elsewhere, that is considered an online donation. Online donations can be generic, or for a specific fundraising event, crowdfunding campaign, peer-to-peer campaign, text-to-give, or recurring program.
People often donate stock to charities because doing so allows them to avoid paying capital gains taxes. By donating stock directly rather than selling it first, nonprofits receive more of the total value of the stock. Plus, donors can deduct the value of the stock from their taxes.
Similar to donating stock, people choose to donate cryptocurrency for the benefit of not paying capital gains taxes. Typically, a broker sells the crypto on behalf of the organization, which then receives the cash value.
Legacy donations – part of planned giving – occur when the donor leaves a gift in their will for the nonprofit of their choice. It may include a part of one’s property or estate and is made to create a lasting impact.
Sending donor acknowledgment letters is a must for nonprofits so that donors know their donation was received and appreciated. It also helps establish long-term relationships with donors, better ensuring that they will give again.
Focus on messaging that shows the donor their role in your organization’s mission. How will their donation be used to serve your mission? Donors will be more likely to give again in the future if they see how their donation is working.
Pro tip: Did you know that 71% of your donors feel more connected with your organization when they receive personalized materials? Personalizing a donor acknowledgment letter is a good way to start a lasting relationship.
In addition to donation acknowledgment letters, it’s vital to send prompt donation receipts. This both ensures donors that you have the correct information about their donation and, if you have 501(c) status, allows them to deduct the donation from their taxes. For donors to claim contributions of $250 or more, the IRS requires that they receive a written receipt of their gift.
This is a great incentive for your donors to give to your organization year after year—and it means you need to do everything required to stay in good standing with the IRS and your donors.
Donation receipts must be sent immediately following the completion of the donation. Donor acknowledgment letters should be sent as soon as possible, typically within a week (if not sooner).
You’ll want to send out your acknowledgment letters ASAP for a couple of reasons:
Pro tip: When it comes to recurring donors, you only need to send a donor acknowledgment letter after the first gift and if the donation amount increases. Otherwise, send a quarterly thank you of some kind. But be sure to still send a donation receipt after every donation!
Now that we know how vital it is to acknowledge donors in the right, timely manner, what has to go in a receipt for a donation? The IRS requires that all 501(c) nonprofits send receipts for donations of $250 and over that contain the following information:
Although not required by the IRS, some organizations also include their address and their Employer Identification Number (EIN). It’s up to you how much information you put in your letter, but you must clearly state the name of your organization. You may also clarify which kind of nonprofit your organization is—501(c)(3), 501(c)(5), etc.
This should be the name the donor used to make the gift. If you choose to mail a donation receipt, you may also need to include your donor’s address on the document to follow proper business letter practice, but this is not required.
Although not required by the IRS, including the date on your donation receipt is a service for your donor. The IRS asks that donors keep records of their donations over $250 like bank statements or credit card statements, but if the donor does not have access to these materials the IRS will accept the receipt as evidence of the date.
Pro tip: It can sometimes be tricky to ascertain the date of donation in cases of mailed checks. The best practice is to use the postmarked date. This is especially important around the end of the year when your organization might be getting several checks that you don’t deposit until the following year. You want to be sure your donor gets the tax deduction in the year they intended. Credit card donations are easier—the date of donation is simply the date of the charge!
Including the donation details on a receipt helps your donors claim tax deductions on the donation amount.
Donorbox makes it easy for you! Every time someone gives to your organization via Donorbox, they automatically receive a donation receipt including the donation amount, date, payment method, dedication type (if any), and more.
If the donation is cash, you should state so and include the amount donated. For non-cash donations, you’ll need to describe the nature of the gift.
In-kind gifts can be tax-deductible for donors, but it is the responsibility of the donor to value the donation. You should still provide a receipt with a description of the goods or services received.
Stock gifts should include both the number of stocks given and the stock name. It should not include the fair market value of the stock. Donations of cryptocurrency should include the amount donated and the type of currency.
For gifts of property, the physical address/location should be marked on the letter so the IRS can match it with any property appraisals.
If your donor got anything in return like a ticket to your organization’s gala or museum admission, it’s important to say so on the letter and provide a good-faith estimate of the value of whatever goods or services you provided in return for the contribution. If your donor didn’t get anything in return, you still need to include a statement saying so.
You can also include a statement that your donor received intangible religious benefits in return if that’s the case.
Note: Although the IRS doesn’t require you to provide this information for donations under $250, it’s still good practice. You know that donations of every size are helpful to your organization, so you want to make sure donors of every size feel appreciated, too.
Although you have more flexibility when it comes to your donor acknowledgment letters, most organizations choose to send a formal business-style letter. Those kinds of letters typically have the following features –
This is the most common way to acknowledge donors. You can choose to send your letters through the mail or as an attachment via email. Some organizations have even turned to sending postcards instead of letters, but you should exercise caution with that since you want to protect your donor’s privacy.
Here is a downloadable guide that visually highlights best practices as well as gives you a template and worksheet you can use to get started right away!
Pro tip: When you work up a form letter that you think works for your organization, run it by an attorney who specializes in nonprofit matters. They’ll be able to confirm that you have all the necessary information.
While there is no penalty to your organization for not providing timely acknowledgment letters, there is a significant negative consequence: you aren’t treating your donors properly. Sending a thank-you note right after donors have given ensures that you’re conveying your gratitude to them. Your donors will feel valued and will be more likely to want to give to your organization again in the future.
Sending a donation receipt is required for your donors to enjoy the full tax benefits of their donation, so it’s important to send one ASAP – which is where Donorbox’s automated donation receipts can help!
The best thing you can do? Automate your donation receipts with your donor management system.
With Donorbox, you can send an automatic receipt via email. This email is customizable to include a thank-you message as well as donation details.
To access this receipt editor in Donorbox, log in to your org account or sign up. Then, head to the Campaigns page and select a campaign you’d like to edit (or create a new one).
In the Campaign Editor, select “Receipt Emails”, then make your changes in the provided form (as shown below). You can choose to add variables, photos, personalized messages, and more! Click “Update” and you’re emailed receipts will officially be customized.
Automating this process means you’ll never miss sending a donation receipt. Your donors will appreciate the prompt acknowledgment with all the correct information they need to deduct their donation.
You should, however, still follow this automated donation receipt with a personalized donor acknowledgment letter.
Pro tip: You also need to send a year-end donation receipt with a summary of all gifts a donor has given over the course of the year. This helps your donors when it comes time for them to file their taxes. The good news? Donorbox also automates year-end tax receipts, meaning you don’t have to worry about compiling that data yourself. Learn more about Donorbox’s receipt automation here.
You know how important donations are to your organization. When someone goes out of their way to support your work, it’s important to provide them with everything they need to feel properly appreciated and to reap all the benefits donating provides them.
By automating the donation receipt process with Donorbox, you’ll never have to worry that you’ve missed getting donors the prompt information they need. But it’s also vital to follow those receipts up with personalized donor acknowledgment letters to showcase how grateful you are for every donation! Use the guide and template provided in this article as a starting point to craft an acknowledgment letter your donors will be happy to receive.
For more donor management tips, look around the rest of our nonprofit blog.
Donorbox is a powerful fundraising solution serving over 50,000 organizations across the globe with its advanced features like recurring donation forms, crowdfunding, fundraising pages, peer-to-peer fundraising, Membership campaigns, and more. Learn more about us on our website.
Lindsey spent years wearing many hats in the nonprofit world. Whether she was helping arts nonprofits with their messaging and content, planning a fundraising gala, writing an NEA grant proposal, or running a membership program with over 400 members, she learned how to navigate – and appreciate! – the fast-paced world of fundraising. Now, she loves sharing those hard-earned lessons with the Donorbox community.
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Lindsey Baker Bower