Nonprofit How-to: Creating a Donation Receipt

Donation receipts are how a nonprofit acknowledges a monetary contribution from its donors. And while donation receipts come in various forms,  each receipt serves the same purpose. Beyond donor acknowledgment and appreciation, these messages also help donors file their annual tax return deductions and can help your charitable organization keep good internal records of gifts.

Sending clear and consistent nonprofit donation receipts is an industry best practice that helps everyone involved with your charitable organization. Plus, streamlining and automating the process of creating and sending these receipts can help your nonprofit grow sustainably.

To help make that more achievable, here’s everything you need to know about creating a donation receipt letter for tax purposes.

When Is a Nonprofit Donation Receipt Required?

There are legitimate tax reasons to send out donation receipts for income tax purposes. The specific legal instances  requiring you to send these donation receipts include the following three basic scenarios:

• When charitable contributions are greater than $250
• When a donor receives goods or services for donations greater than $75
• When a donor specifically requests a receipt

It also doesn’t matter if the amount donated is in cash, stocks, or in-kind donations. As long as the value of the charitable donation exceeds $250 (or $75 with an exchange of goods and services), then you must provide a donation tax receipt.

Failing to send these receipts can cost you a penalty of $10 per donation, up to $5,000 for a single fundraising campaign. However, you can avoid that cost by providing the required gift acknowledgments.

While there are times when charitable donation receipts are a requirement, it’s best practice to use these receipts as often as possible. Following this process keeps your nonprofit more organized and in compliance at all times. Plus, these receipts don’t have to be printed—you can share and store them electronically, as long as you send them to the donor.

How Do I Write a Nonprofit Donation Receipt?

Your donation receipt can either be a mailed letter or an email donor acknowledgment letter. And while your donors might prefer one over the other, you should select the one that works best for your nonprofit organization.

There’s no one right way to send a donation receipt, but there are certainly more effective best practices you can employ. Here are four helpful tips to get you started:

1. Keep the formatting simple: The goal of donation receipts is straightforward, so your formatting can be, too. That’s not to say it shouldn’t have a professional design, but the priority is on the content. In other words, these receipts can have a more basic design compared to other fundraising letters or emails.
2. Include your branding: As with every communication from your organization, a donation receipt benefits from showcasing clear nonprofit branding. Include your logo and other consistent brand elements as you would on your nonprofit’s website or campaigns. Leading with your brand makes the receipt look professional while reminding people of your mission.
3. Thank donors for their contribution: Take every opportunity you can to show appreciation to your supporters. You could even use a boilerplate paragraph explaining how their donation will impact others.
4. Automate sending receipts when possible: A strong nonprofit fundraising software can send electronic receipts instantly to save you time and printing costs. You may still need to send paper receipts for in-person or mailed gifts, but you can also have a streamlined system in place to generate each receipt.

How to Create Tax-Compliant Donation Receipts

Even though nonprofit donation receipts can look different, each one needs a few of the same elements. Here’s a list of what to include in each of your receipts:

• Organization’s name
• Donor’s name
• Recorded date of the donation
• Recorded donation amount
• Organization’s 501(c)(3) status
• Your acknowledgment no goods/services were exchanged for the donation
• Your estimate of those goods/services if exchanged

Those are the basics, but you can take your receipts to the next level by adding a few other elements. Here are a few ideas to get you started:

• Your organization’s EIN number
• Your contact information: website, phone number, and address
• A short message of appreciation
• Your organizational leader’s signature (CEO or Executive Director)

First, take some time to craft the outline of your donation receipt. Then, use this template to automatically scale the creation of each receipt. You can also (and we highly recommend) revisit this template annually to make updates.

Does the IRS Check Donation Receipts?

In short, yes—the IRS may not check every individual donation receipt, but it’s best to operate as if it does. You want to be ready if the IRS decides to check your records.

You can risk disqualification of your tax-exempt status of some donations because of incomplete records and you don’t want to cause any frustration for your donors over an easily correctable mistake.

Start Sending Donation Receipts

Donation receipts are an important part of your nonprofit’s operations and administration as these communications help with donor retention and record-keeping.