How should Section 501(c)(3) nonprofits acknowledge donors’ charitable contributions? A thank you note or small gift is certainly a kind gesture of gratitude, but understanding a donor’s tax reporting requirements may best demonstrate care as well as required legal compliance. Donors need specific documentation in order to substantiate their contributions as charitable deductions on their tax returns. Providing accurate detailed charitable receipting in a timely manner thus can benefit donors immensely, especially since some donors may not even be aware of the required documentation. The following FAQs explain what nonprofits need to know and apply in their charitable receipting practices for their valued donors.
Why are contemporaneous written acknowledgments required for charitable contributions?
Internal Revenue Code Section 170 provides for broad deductibility of charitable contributions but states that the deduction is only permissible if these contributions are verified. Proper verification, most often through a contemporaneous written acknowledgment, shows the IRS that the donor intended their contribution as a gift and ensures that the amount deducted by the donor doesn’t exceed the net amount received by the Section 501(c)(3) organization in cases where goods or services are exchanged for such donations. Nonprofits are required to provide charitable receipts to facilitate donors’ ability to claim a charitable deduction. When a nonprofit provides a good or service in exchange for the donation, they may incur penalties for failing to provide this information in the receipt. (See question 4 below.)
When should nonprofits send contemporaneous written acknowledgments to donors?
The IRS requires donors to obtain a contemporaneous written acknowledgment for all cash gifts over $250, in order to claim a charitable contribution. Nonprofits must therefore timely provide the required documentation. In this context, the word contemporaneous means that the nonprofit organization must provide an acknowledgment no later than the tax reporting deadline of the applicable tax year.
In practice, most nonprofits send contemporaneous written acknowledgments by January 31 of the year following the donation. A nonprofit may send one year-end acknowledgment reflecting a donor’s multiple contributions through the subject year. (E.g., “Thank you for your generous contributions in 2024, which total $___________ . . . .”)
What information must the acknowledgment include?
A proper written acknowledgment of a charitable contribution includes:
1. The name of the nonprofit organization that received the contribution;
2. The date of the contribution;
3. The amount contributed (or, for noncash contributions, a description of the property contributed); and
4. Whether any goods or services were provided in exchange for the contribution and, if so, a description and good faith estimate of the value of those goods or services.
For example:
Thank you for your $300 cash gift to ABC Charity, received on January 1, 2025. ABC Charity is a tax-exempt public charity under § 501(c)(3) of the Internal Revenue Code. No goods or services were provided to you as a result of your contribution.
Some nonprofits may wish to provide a concluding disclaimer such as the following: “Please consult a qualified tax professional for further guidance regarding the deductibility of your contribution for your personal tax situation.”
How should nonprofits disclose goods or services provided in exchange for charitable contributions?
When a nonprofit provides a good or service in exchange for a donor’s contribution (e.g., dinner at a fundraising gala or a tote bag featuring the nonprofit cause), the written acknowledgment rules change. First, the nonprofit organization must provide a written acknowledgment for all contributions over $75. Second, because the charitable contribution is only deductible if it exceeds the fair market value of any benefit received, the nonprofit organization must provide the following disclosures on the written acknowledgment:
1. Inform the donor that the deductible amount is limited to the excess contributed over the value of goods and services provided; and
2. Provide the donor with a good faith estimate of the value of the goods or services provided.
Nonprofit organizations may use any reasonable method to estimate fair market value. Here is an example of a written acknowledgment for a donor that received a benefit in exchange for their contribution.
Thank you for your $300 gift to ABC Charity, received on January 1, 2025. ABC Charity is a tax-exempt public charity under § 501(c)(3) of the Internal Revenue Code. You received a dinner with a fair market value of $75 as a result of your contribution. Your contribution is limited to the amount of your donation reduced by the value of the goods provided to you in return for your donation.
What if a nonprofit provides only low-cost items in exchange for a donor’s contribution?
If a nonprofit only provides goods or services with “insubstantial value” in exchange for a charitable contribution, the value of the goods or services may be disregarded. In other words, the nonprofit does not need to disclose the provision of goods or services with insubstantial value, and the donor’s total contribution may be claimed as tax-deductible. What counts as “insubstantial value”? This definition may be satisfied in various ways as follows.
First, goods or services are of insubstantial value if their value does not exceed the lesser of 2% of the donation amount or $136 (in 2025). This $136 amount is tied to inflation and so changes on an annual basis; consult IRS.gov for current inflation adjustments. For example, if a donor contributed $1,000 to a charity and received a $15 branded notebook in exchange, the charity does not need to disclose the value of the notebook on the charitable receipt. The donor may deduct the entire $1,000 as a charitable contribution.
Second, certain goods are also considered to have insubstantial value, if they bear the organization’s name or logo (for example, mugs, keychains, or calendars), if these items in the aggregate are worth less than $13.60, and if the donor’s contribution is at least $68.00 (again, with amounts adjusted annually for inflation). In this situation, the goods may also be disregarded for purposes of the charitable contribution deduction and not required to be listed as “goods or services” provided in exchange for the donation. For example, imagine a nonprofit that runs a fundraising campaign and offers donors an $8 branded mug in exchange for a $70 contribution. Because the value of the mug falls below the 2025 threshold for threshold for low-cost articles, its value may be disregarded. The nonprofit need not disclose the value on any charitable receipt.
What if a nonprofit provides membership benefits or “intangible” religious benefits?
Membership benefits and intangible religious benefits are two additional exceptions to the disclosure requirements of goods and services given in exchange for a contribution.
First, organizations do not need to disclose membership benefits provided in exchange for a charitable contribution, so long as any benefits are provided in exchange for an annual payment of $75 or less and consist of annual privileges such as discounts at a gift shop, free or discounted admissions, free parking, or discounts on tickets to member-only events where the cost of such events per person (excluding overhead) is “low-cost” as defined above.
Second, a religious organization does not need to report intangible religious benefits provided to a donor. Intangible religious benefits include, for example, admission to worship services, participation in sacraments or rituals, spiritual counseling, prayers and blessings, religious education, or membership privileges.
How should nonprofits acknowledge noncash contributions?
Proper tax reporting for noncash contributions generally depends on the value of the property contributed, as follows:
$250-$500: Much like cash contributions, the nonprofit should provide a contemporaneous written acknowledgment with the information described in question 3 above. The acknowledgment should describe the property contributed but should not provide a valuation.
$501-$5,000: Nonprofits should still provide donors with a contemporaneous written acknowledgment as described above. Donors also need to provide the IRS with Form 8283 to substantiate the contribution. The nonprofit must complete and sign Part V of this form to acknowledge that it is a qualified organization under § 170(c) and to confirm the date it received the donated property.
$5,001-$500,000: In addition to the contemporaneous written acknowledgment and Form 8283 requirements, the donor must obtain a qualified appraisal for the property within 60 days of the contribution unless the donated property is a publicly traded security or certain qualified intellectual property.
Over $500,000: In addition to the requirements above, the donor must attach the qualified appraisal of the property to their tax return.
What if a nonprofit sells donated property shortly after receipt?
If a nonprofit sells or disposes of donated property within three years of a donor’s contribution, the nonprofit may be required to complete Form 8282 to report the sale price. This requirement does not apply, however, if the items are valued at $500 or less or if the items are consumed or distributed for charitable purposes. Because sales of donated property may implicate complex tax compliance issues, nonprofits should consider seeking counsel from a tax attorney prior to any sale.
How should nonprofits acknowledge donations of cryptocurrency?
The IRS’s current position is that digital assets are not cash; therefore, the rules for acknowledging noncash contributions apply (see question 7). The IRS has also clarified that cryptocurrencies are not publicly traded securities, so donations of cryptocurrency over $5,000 require a qualified appraisal. Because the appraisal requirement applies to the donor, nonprofits should take care not to assign a specific value to the cryptocurrency donation on either its written acknowledgment or the Form 8283.
Donors may not be aware that the qualified appraisal requirement applies to cryptocurrency donations. As a best practice, nonprofits should remind donors of their Form 8283 filing obligation and that they may need to obtain a qualified appraisal. Because cryptocurrency may be more difficult to appraise than other forms of donated property, donors should know that parties to the transaction are not authorized to appraise the donation and that the liquidation value or guaranteed quote that comes with a trade of cryptocurrency cannot count as an appraisal.
What if a nonprofit fails to provide a contemporaneous written acknowledgment?
Because donors are required to substantiate charitable contributions to obtain their tax deduction, it is ultimately their responsibility to obtain a contemporaneous written acknowledgment. However, a missing or incomplete written acknowledgment can result in adverse tax consequences for donors, so charities and foundations should provide prompt and complete receipts to maintain good donor relationships and their reputation. Flagging important and often overlooked requirements such as the appraisal requirements for cryptocurrency donations can build further goodwill with donors to help ensure donors receive their charitable deduction.
In addition, if a charity or foundation provides goods or services in exchange for contributions, the IRS imposes a $10 penalty for each failure to provide a proper written acknowledgement, with a cap of $5,000 per fundraising event or mailing.
Conclusion
Proper charitable contribution receipting helps nonprofits care for their donors and ensure that they are well-positioned to substantiate the tax deductibility of their gifts on their personal tax returns. Promoting trust among nonprofits’ current and potential donors can help advance their missions through financial vitality and long-term flourishing.
