Donation Receipts: Understanding the Obligation and the Opportunity

You know you have to keep accurate records for your nonprofit’s health and transparency and to be in good standing with state and local laws. Some of the tasks associated with maintaining records—like sending donation receipts—can seem tedious and unnecessary. Even so, you can’t opt out of sending them: The IRS requires donors to have a receipt for any gift made to a nonprofit for more than $250 for tax deduction purposes.  

That’s your obligation. But don’t despair! There’s also a lot of opportunity here. 

Looking at donation receipts as an opportunity 

Keeping track of who donated what and when is a great opportunity to understand and communicate with our donors. In fact, there’s good reason to invest in making the donation receipt more than an administrative afterthought. 

What your donation receipt needs to include

Aside from the legal requirements of IRS 1771, it’s worth remembering what the standard mechanism for a donor receipt looks like. 

As a rule of thumb it goes:

• Nonprofit’s name
• Nonprofit’s address
• Nonprofit’s telephone numbers
• Amount donated
• Donor’s identify
• Which nonprofit was the beneficiary of the donation
• Date of donation
• The legal footnote stating: “No Goods Or Services Were Provided In Return For This Gift”
• Stating if it was a cash, check, or online donation or a physical gift
• Signature of the recipient

If the gift was in the form of someone donating their experience and expertise, they could deduct that from their tax obligations using the donation receipt. In that case, it’s important that the individual offering the services makes it clear they are gifting a service to you and therefore it can be assigned as a deductible. 

It’s a win-win situation for both parties. Your nonprofit gains someone’s valuable abilities, while they get a reduction of their tax liability.

Keep in mind that if it’s a religious organization providing the receipt then it must be clearly stated that “intangible religious benefits” were delivered as part of the receipt. 

Sending the donation receipt

How you deliver this receipt to the recipient is up to you. You can send them via email, a posted letter, or even a simple PDF forwarded by a messaging app.

Electronic delivery comes with the option of adding click-through links, which provides greater scope for further engagement. It’s also a lot cheaper than printing and mailing physical documents and considerably less time consuming.

Additional benefits of sending donation receipts

Legal requirements aside, there are many additional benefits that come with sending receipts—regardless of whether the donation amount is above or below that $250 threshold. 

For example, someone who donates $20 this year might return and donate $300 the following year. Donors often become more loyal to a nonprofit the longer you engage with them—as long as the engagement is meaningful. The receipt for the $20 donation can come as part of larger donor retention and growth. 

Taking advantage of software support 

Your donor management software or nonprofit CRM should have a standard donation receipt template you can use. This will make the process of sending them less time consuming. 

For example, Bloomerang has ways of keeping the boring part as pain free as possible. 

Making the best use of donation receipts

We’ve all received impersonal messages where it’s obvious that only the name has been changed. On the other hand, when we see that the nonprofit has put more effort into their communications, we appreciate the extra effort. 

One way to do that is to ask questions. Pretending you know the individual well when you don’t may come across as a marketing ploy, whereas asking a question about them opens up an honest dialogue which then creates the opportunity for a genuine connection.

When you use the right software and add your unique components, the receipt is no longer an afterthought; it’s an opportunity explored. You should strengthen your individual connections to your donors and hopefully secure more donations in the future.