Some people ignore donation receipts as they keep them aside from the list of crucial documents. However, the truth is different from this habit. Charitable donation receipts are equally important as receipts of any purchased item are valuable.
Do you know why? Because these receipts help adhere to IRS regulations. They are also handy for cash donation tracking, goods or services valuations, and tax deduction claims.
Apart from this, donation receipts also play a vital role in showing greetings to the donor. It proves that the donation from the donor holds value regardless of the amount and size.
In this blog, we will explore and get insight into everything about tax receipt for donations.
What is a Donation Receipt?
A donation receipt is a written acceptance that nonprofit organizations issue regarding every received donation. These written receipts are aligned to legal status. The organization can generate and send tax receipts for donations in official or informal ways.
These nonprofit donation receipts help donors file their annual income tax return deductions. Also, they build a strong bond between donors and organizations.
However, generating donation receipts might be hectic. Fortunately, there are many donation receipt templates available to save time and effort. They accelerate invoice generation with high data accuracy.
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Types of Donation Receipt
There are different types of donation receipts with different nature and purposes. Here are multiple receipt types, presenting their scope of use.
1. Charitable Donation Receipts
A charitable tax donation receipt is mainly handy for charity organizations. These receipts are in the form of a letter, email, or any other receipt form. It contains details like the donor’s name, nonprofit organization name, donation amount, and type of donation. Any gift above $250 must be recognized with a receipt as per the IRS.
2. Money Donation Receipt
Any receipt given in alignment with a cash contribution comes under this category. This kind of receipt must contain the amount of the donation.
3. In-kind Donation Receipt
In-kind donations or gifts are in the form of services or goods given by the donor. Goods gifts hold a dollar value, and they are tax-deductible, whereas service gifts are non-tax deductible and do not hold a dollar value. The main details mentioned in the donation tax receipts are the donor’s name, gift description, and receiving date of donation.
4. Stock Gift Donation Receipt
This receipt is about the stock-sharing donation of any firm. There should be a name of the corporation and the number of shares donated. It is good to send a follow-up letter to showcase the donated share value.
5. Year-ending Donation Receipt
This kind of receipt is usually sent to those donors who contribute $250 or above to that. This donation is generally to stay compliant with government policies and acts.
6. Silent Auction Receipt
These receipts find their application for the auction events where attendees purchase the item. The key details to include in the receipt are the organization name, event date, and value of each item.
When There Is a Need For a Non-Profit Donation Receipt?
The main requirement of a non-profit donation receipt is tax deduction claiming. Donors can effortlessly provide donation proof to the IRS.
Donation receipts also need to keep track of financial investments. They help in the care of proof and proper records for both parties. The receipt also helps strengthen non-profit organizations and donor links.
According to the general rule, a written communication for donations of up to $250 can be there. However, there is a need for official receipts for donations of more than $250 or if the donor receives goods or services for the donation of more than $75.
Donation receipts are not only important for donors. It is equally prime for the organization. It helps charities to accomplish their legal work, tracking donation history and getting accurate financial records.
However, every organization has its threshold for giving receipts. For instance, some organizations only donate receipts when the donation is given for $50 or above. So, it is necessary to clear the terms before donating.
How to Generate a Donation Receipt for Tax Abiding?
The format and receipt look might be different from organization to organization. Some information needs to be mentioned in the donation receipt in the USA as follows:
1. Charity Name
The receipt should include the name of the organization/charity. Contact details like cell phone number, email ID, and residential address are also crucial. You can also include the EIN or ID number of your organization.
2. Donor Name
Including the donor’s name is another crucial element in the receipt. You should be mindful of the spelling mistakes. Adding the donor’s contact number, email ID, and address is also a good idea.
3. Donation Date
The receipt should include the donation date. As per IRS rules, it is compulsory to mention the charitable contribution date. The donation may be disallowed if the contribution date is missing. It might also create an issue when the donation date is wrong. This kind of case mostly happens around year’s end.
Donors donate in December month, but the organization does not receive the donation in January. So charities should always be careful when mentioning the date.
4. Detailed Description
There should be correct data on the donation receipts for the cash donation amount. A comprehensive overview of the items for the non-cash donation is a must. Similar nature of donated items can be in groups like clothing, books, and furniture. It is good to mention stock shares for stock donations. In the property donation case, the property location should be mentioned on the receipt.
5. Donation Amount
The amount of cash should be there on the tax receipt for donations. In a non-cash donation, the donor should mention the proper valuation of non-cash items. Charity organizations should never be involved in it and not include the value of the item received. It is also applicable even if the charity is aware of the value. It is always the donor’s responsibility to mention the value of the donated item.
6. Statement of Goods or Services
It is one of the most crucial fields on donation receipts. IRS never allows the deduction to donors when this language is missing from the receipt. There is only the need for the simple statement “no goods or services were given in the donation exchange.” Similarly, for the intangible religious benefits, there is a need for a statement regarding the benefits.
7. 501(c)(3) Statement
The organization must include a 501(c)(3) statement on the receipt. As per the rule, 501(c)(3) tax-exempt organizations can receive tax-deductible charitable contributions in the US.
8. Tax Deduction Statement
If the charity puts forward anything to the donor, then the receipt should contain the value of goods or services. It is also called “quid pro quo.” A donation of more than $75 should have clear disclosure from the donor side. However, donations of less than $75 may be excluded.
The statement indicates that deductible contributions for income tax objectives is limited to the surplus capital contributed beyond the value of the benefit received.
9. Signature
Adding a signature makes the donation receipts more authorized. So, at last, it is a good idea to integrate the signatures of authorized persons from the organization.
The donation receipt template has all these in-built fields. The organization only needs to fill in the details, and the receipt is ready to use.
Note: For the intangible religious benefits, religious organizations do not have to mention or assign value.
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How to Make Receipts More Engaging?
When you send a donation receipt with a catchy outlook and rich content, it enhances the impression of the donor. Additionally, with all the crucial information, you can follow the below tips.
Photographs
A quality photo of the donor and volunteer can make the design more engaging. Also, it adds extra authorization points to the tax receipts for donations.
Testimonials Video
Ask your donor if they can provide a testimonial video. Adding short videos that present your donor’s words can make an engaging donation receipt.
Social Media Links
Social media links in the receipt can be a great initiative to promote your social media platforms.
Thanks Message
Adding a thank you message at the end of the charitable contribution receipt is another way to make it more engaging. It lets your donors feel respected.
Wrapping Up
Tax receipts for donations are a good way to keep everything organized. Meanwhile, it is also compulsory to go through IRS rules. Donors must be aware of tax-deductible donations and obtain the necessary documentation. Donation receipts are equally crucial for donors and organizations.
Moon Invoice simplifies the receipt generation process. Explore thousands of templates that suit your needs. With fully customizable features, they enable you to create receipts according to your requirements. Manage your end-to-end receipt process seamlessly with no complex approach.
FAQs
Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
