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A donation acknowledgment letter is a pretty standard nonprofit practice. In essence, it’s a thank-you letter sent by an organization to someone who has donated money or items.
Though every donation acknowledgment letter can be different, each one typically includes details about the donation itself as well as a heartfelt thank you.
Why should you acknowledge your donors?
Acknowledging your donors is essential for several reasons and is a fundamental practice that all nonprofits should abide by.
Acknowledging donors helps nonprofits:
Build relationships: Regular acknowledgment helps build and maintain strong relationships with donors. It creates a sense of community, loyalty, and trust, and shows that you care about the people who support you, which in turn, can create long-term engagement.
Encourages more giving: Satisfied and appreciated donors are more likely to give again in the future. When donors know their contributions are valued, they feel more inclined to continue their support, which is really important for nonprofit sustainability: retaining donors is often more cost-effective than finding new ones.
Remain compliant: Acknowledgment letters serve as official receipts for tax purposes, which are often required by federal law. Donors can use these letters to claim deductions on their taxes, making it easier for them to support your organization.
When should nonprofits send receipts and acknowledgment letters?
Timely acknowledgment of donations is crucial for maintaining donor satisfaction and compliance with tax regulations.
In general, nonprofits should send receipts and acknowledgment letters:
Immediately after receiving a donation: Sending a receipt or acknowledgment letter immediately after receiving a donation shows that your organization is efficient and values the donor's contribution. Aim to send these letters within 48 hours of receiving the donation.
At the end of the year: At the end of the calendar year, send an annual statement summarizing all the donations received from each donor. This is particularly helpful for donors when preparing their tax returns.
After a special campaign or event: If a donation is part of a specific campaign or event, send a special acknowledgment letter that references the campaign or event. This personal touch can increase donor satisfaction and loyalty.
After receiving a major gift: For major gifts or significant contributions, send a personalized acknowledgment letter. This could include a handwritten note or a call from a board member or executive director.
At regular increments for monthly or recurring donations: For donors who give monthly or on a recurring basis, send a receipt or acknowledgment each time a donation is made. In addition to monthly receipts, consider sending quarterly or annual summaries to these donors. This helps them keep track of their contributions and reinforces their ongoing support.
Types of donations you need to send acknowledgment for
Acknowledging donations properly is essential for building trust with your donors and ensuring compliance with tax regulations.
1. Cash donations
Cash donations include any contributions made via cash, check, bank transfer, or credit card.
For charitable contributions of over $250, the IRS requires that nonprofits send donation receipts that include a few important details:
Name of your organization
Donation amount: Clearly state the amount of the donation.
Date of donation: Include the date when the donation was received.
Donation description: Include a description in the case of non-monetary gifts
Tax information: Confirm that no goods or services were provided in exchange for the donation unless it’s not the case.
Example: “Thank you for your generous cash donation of $500 to [Charity] received on June 15, 2024. Your support is making a significant impact on our mission. No goods or services were provided in exchange for your contribution, making it fully tax-deductible.”
2. In-kind donations
In-kind donations are non-cash contributions such as goods, services, or volunteer time.
Acknowledgment details include:
Description of donation: Provide a detailed description of the donated items or services.
Estimated value: Mention the estimated fair market value of the donation, if possible.
Tax information: Explain that the donor is responsible for determining the value for tax purposes.
Example: “Thank you for your in-kind donation of office furniture, including two desks and three chairs, received on July 1, 2024. Your contribution helps us create a better work environment for our team. No goods or services were provided in exchange for your donation.”
3. Online donations
Online donations are contributions made through your website or other digital platforms.
Acknowledgment details include:
donation Amount: Clearly state the amount of the donation.
Date of donation: Include the date when the donation was made.
Transaction details: Reference any transaction or confirmation numbers if applicable.
Example: “Thank you for your online donation of $100 made on June 20, 2024. Your support helps us continue our important work. No goods or services were provided in exchange for your contribution.”
4. Stock donations
Stock donations involve transferring ownership of stock shares to your organization.
Acknowledgment details include:
Description of stock: Include the number of shares and the name of the stock.
Date of transfer: Note the date when the stock was transferred.
Value information: Mention that the donor is responsible for determining the value of the stock for tax purposes.
Example: “Thank you for your generous donation of 50 shares of ABC Corporation stock transferred on July 5, 2024. Your support is invaluable to our mission. No goods or services were provided in exchange for your donation.”
5. Cryptocurrency donations
Cryptocurrency donations are contributions made in the form of digital currencies like Bitcoin or Ethereum.
Acknowledgment details include:
Type and amount of Cryptocurrency: State the type and amount of cryptocurrency donated.
Date of donation: Include the date of the transaction.
Value information: Mention that the donor is responsible for determining the fair market value for tax purposes.
Example: “Thank you for your donation of 0.5 Bitcoin received on July 10, 2024. Your contribution helps us advance our cause in innovative ways. No goods or services were provided in exchange for your donation.”
6. Legacy donations
Legacy donations, also known as planned gifts, are contributions left to your organization through a will or estate plan.
Acknowledgment details include:
Description of bequest: Provide a description of the bequest or planned gift.
Acknowledgment of future gift: Confirm receipt of the notification of the planned gift.
Gratitude: Express deep gratitude and explain how the legacy gift will support your mission.
Example: “Thank you for including our organization in your estate plan with a legacy donation. Your thoughtful bequest will have a lasting impact on our work. We are deeply grateful for your foresight and generosity.”
How to properly structure a donation acknowledgment letter
There’s no one right way to structure a donation acknowledgment letter, but typically, they follow this format:
Header
Organization’s letterhead: Include your nonprofit’s official letterhead at the top.
Date: Add the date when the letter is being sent.
Salutation
Personalized greeting: Address the donor by their name (e.g., "Dear Mr. Smith" or "Dear Dr. Johnson").
Opening paragraph
Gratitude and confirmation: Immediately thank the donor for their generosity.
State the donation details: Mention the amount donated and the date it was received.
Body paragraph
Impact of the donation: Explain how the donation will be used and its positive impact on your organization’s mission or a specific project.
Personalization: If applicable, mention any personal connection the donor has to the cause or any previous support they’ve provided.
Closing paragraph
Reiterate thanks: Express gratitude once again for the donor’s support.
Future engagement: Encourage continued support or involvement with your organization (e.g., attending events, volunteering).
Closing
Warm closing: End with a warm closing (e.g., "Warm regards" or "With heartfelt thanks").
Signature: Include the name and title of a relevant staff member or executive.
Footer
Contact information: Provide contact details for further inquiries or to update donor information.
Tax Information: Include a statement about tax deductibility if applicable (e.g., "No goods or services were provided in exchange for this donation").
Donor acknowledgment letter template [free to download]
[Your Nonprofit's Letterhead]
[Date]
Dear [Donor’s Name],
Thank you so much for your generous donation of $[amount] to [Organization name] on [date]. We are deeply grateful for your support of our mission to [briefly mention mission or specific project].
Your contribution will [explain how the donation will be used and its impact]. Your support allows us to [mention specific outcomes or goals achieved]. We couldn’t do this without you!
We look forward to keeping you updated on our progress and hope to see you at our upcoming events. Your continued involvement means a lot to us.
Donor acknowledgment letters are an important part of nonprofit success: prompt, branded receipts sent to donors are great for staying IRS-compliant and maintaining a positive and strong relationship with stakeholders.
With Zeffy, your nonprofit can take advantage of completely free, automated, custom donation receipts. Simple, effective, and easy to use, Zeffy lets your nonprofit manage every part of its operations—from donations to events—without paying a cent.
Yes, nonprofits typically send acknowledgment letters for every donation they receive. Acknowledgment letters serve several important purposes:
Gratitude: They express appreciation to the donor for their generosity.
Confirmation: They confirm the receipt of the donation, including the amount and date.
Tax compliance: They provide donors with documentation for their tax records, especially for donations over a certain amount (usually $250 in the US).
Sending acknowledgment letters for every donation helps maintain positive relationships with donors, encourages future support, and ensures compliance with tax regulations.
The deadline for sending donation acknowledgments depends on tax regulations and guidelines, particularly in the United States (IRS regulations). Here are the general rules:
For cash contributions: Acknowledgment letters should typically be sent promptly after receiving the donation, ideally within a few days to a week.
For non-cash contributions (in-kind, stock, cryptocurrency): Acknowledgments should be sent promptly and must include a description of the donated property and any relevant valuation information.
For year-end gifts: Donations made in December must be acknowledged by January 31 of the following year to ensure donors can include them in their tax filings for that year.
Nonprofits should check with local tax authorities or consult with a tax professional to ensure compliance with specific deadlines and requirements applicable to their jurisdiction.
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