What is a donation acknowledgement?
A donation acknowledgement (often called a donation thank you letter) is a written communication from a nonprofit to a donor that includes the information a donor needs to take any tax-deductions applicable. The IRS requires nonprofits to send donation acknowledgments, so most nonprofits have made the most of this policy by also using acknowledgements to thank their donors for their contributions and build a relationship with donors.
How often should you send donation acknowledgements?
You can choose to send donation acknowledgements on an annual basis as a summary, or one for each donation a donor makes. Best practice is to send both, one acknowledgement when a gift is received, and one acknowledgement at the end of the year that summarizes the donor’s gifts to the nonprofit that year. The annual acknowledgement is the most helpful to donors for tax purposes, so they only have one document to keep track of for each nonprofit they support. Often, the annual acknowledgement is sent via mail, and the acknowledgements of individual donations are sent via email to save the nonprofit on postage and mailing costs. Many donation systems or web pages can be set up to automatically send donation thank you letters via email each time a gift is made.
What information should be included in a donation acknowledgement?
For monetary donations, the IRS requires donation acknowledgements to include:
- The name of the charity
- The amount of the donation (face-value of the check, stock, or cash received)
- The date the donation was made
- A statement about whether the donor received any goods or services in exchange for the donation (and if so, the value of the goods or services received)
- For churches and other religious nonprofits, your statement about goods and services should also include a statement that your donor may have received intangible religious benefits (see the examples section)
It is also best practice to include:
- A statement thanking the donor for supporting your nonprofit
- The EIN of your nonprofit
Some nonprofits choose to keep it short and sweet with their donation acknowledgements, but many also include a paragraph in their letter about the great things the nonprofit will be able to accomplish thanks to its donors. Sending your donation thank you letters on letterhead with your nonprofit’s name and logo on it, or even including photos of your programs can also increase donor’s level of trust in you and your mission.
If someone donates a good or service to your nonprofit, that is an in-kind donation, which is acknowledged differently, but they do still need to be acknowledged. You can see examples of in-kind donation acknowledgements on our next blog post. Not only are the written acknowledgment requirements complex, especially for non-cash donations, but getting it wrong could seriously cost your nonprofit. The cost of noncompliance is generally $10 per contribution! If donations from one event weren’t handled correctly, it could cost your nonprofit hundreds, or even thousands of dollars.
Donation Acknowledgement Examples
Here’s an example of a typical acknowledgement statement for a monetary donation to a non-religious nonprofit organization:
“Thank you for your contribution of $100 that Example Charity (EIN Number: 12345678) received on March 20th, 2022. No substantial goods or services were provided to you in exchange for your contribution.”
For churches and other religious nonprofit organizations, your monetary acknowledgement would read more like this:
“Thank you for your contribution of $100 that Example Church (EIN Number: 12345678) received on March 20th, 2022. No substantial goods or services were provided to you, other than intangible religious benefits, in exchange for your contribution.”
Whether you received a gift for $15 or $1,500, it is important to send your donation thank you letters in a timely manner, both to keep in compliance with the law and to ensure that your donor is thanked for their contribution to your cause.