How to Write a Tax-Deductible Receipt for your Church or Charity
Many people donate to churches and charities with the hopes of getting a tax benefit in return. Your donors are the most important thing to your organization. Without their money, you can’t fulfill your mission. Keep your donors happy. Give them an IRS compliant tax-deductible receipt.
If your donor loses their tax deduction because your receipts were not compliant with recent rule changes, it could cost you the donor and all their friends and family. Don’t chance it. Be 100% certain that your charity’s receipts are IRS compliant.
Record-keeping
All churches and charities need good record-keeping when it comes to donors. Keep track of everything coming in the door. If someone drops 5 bags of clothes and an old couch at your door in the middle of the night, record it. If someone dies and leaves you a million dollars, record it. You need to log everything that comes in the door and who donated it.
Some donations are anonymous and you should log them as such. Even if it is an old couch. Sometimes people refuse a receipt. If you know who donated the goods or money, you need to note their donation whether they wanted a receipt or not.
Example Donor Log
Unlike a business, a charity or church’s goal is to show the maximum amount of income. Donations encourage more donations. Log everything that comes in the door, who it’s from, and assign it a value, even if it is $1 or less. (The value is not for the receipt, but to keep your accountant happy.)
Tax-Deductible Receipt Basics
On your receipt, you should have your organization’s name, address, and EIN (Tax ID).
You should have a statement that you are a 501c3 charity. You should include a sentence like this: “This organization is tax-exempt under IRS code 501(c)(3) and your donations may be tax-deductible.”
Example Receipt Header
For a church operating without an IRS exemption letter, you need to clearly state that you are a church, especially if the word ‘church’ isn’t in your name. (For example, if your organization is named “Life Fellowship” or “Beth Torah”). You should include a sentence like this: “This organization is tax-exempt under IRS code 501(c)(3) as a church and your donations may be tax-deductible.”
Always say “may be tax deductible.” Never promise a tax-deduction. You don’t do their taxes. Deductions are between them and the IRS.
Receipt Specifics
List the donor’s name. Do NOT list their Tax ID.
If they gave money, you need to list the dates and amounts given. You can do this in an annual statement. Donors appreciate that at tax time.
Annual Statement Example
If they donated used goods, give the date and a description of what was given. Do NOT give a valuation of the items. If the donation was a vehicle or something worth over $5000, please check with your tax professional.
Used Goods Example
For NEW items with a receipt (such as coffee, Easter Eggs, children’s art items, office supplies): provide the date, a description, and the amount the donor paid. Get a copy of their receipt. If you cannot get a store receipt from the donor, do not state any value on the receipt.
You can NOT give receipts for “donated time” or the “value of work done” for ordinary volunteer duties.
However, if a professional provides their professional services at no charge to your organization (such as a doctor, lawyer, accountant, etc), they should bill your organization the same amount they would bill a regular client, then you can provide them a donation receipt for the amount they billed you.
Did They Receive Anything in Exchange?
If the donor received anything in exchange, its value and description must be listed. A gift is freely given with nothing in exchange. The value of anything received in exchange is not tax-deductible.
Church Receipt Example
If you are a church and you did not provide any material objects or money to the donor, you need to include this on your receipt: “Only intangible religious benefits were received in exchange.”
If you are a charity and the donor received nothing in exchange, you need to include this on your receipt: “No goods or services were received in exchange for this donation.”
If the only thing they received for their donation was membership benefits, such as free admission to the organization’s events, it is considered that nothing was received in exchange.
Charity Receipt Example
If anything else was received in exchange, it needs to be listed on the receipt and valued. The IRS has a number of rules governing this and you should consult a tax professional or check out IRS Publication 1771.
Helpful Hint
When you issue a statement or receipt, it is a good time to express heartfelt thanks to your donors and give an update on how their donations are being used. Include something like: “We found forever homes for 322 dogs last year” or “We brought humanitarian aid to 400 families” or even “Your donation helped us to repaint fellowship hall and replace the broken chairs.” A quantifiable achievement goes a long way to make people feel like their donations are making a difference and encourages future giving.
Summary of Required Items on a Donation Receipt
- Your Information: Name, Address, Tax ID
- Sentence saying the you are tax-exempt and their donation may be tax deductible.
- Donor’s Name
- Date and Description of what was given.
- Sentence saying that nothing was given in exchange (or only religious benefits)
- (Optional) Update on accomplishments and note of thanks
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More on nonprofit issues:
Tax reporting for Nonprofits (with free download)
You can learn more about churches and charities on the IRS website
