Donation receipts for dinners, auctions and event tickets

The rule over $75

When a donor pays more than $75 partly as a gift and partly for goods or services, the charity must give a written disclosure statement that:

• tells the donor that the deductible amount is limited to what they paid minus the value of what they received, and
• gives a good-faith estimate of the fair market value of what they received.

It must be given when the gift is asked for or when it is received, and in a way the donor is likely to notice. Small print buried in a long document may not count. The penalty for missing it is $10 per contribution, up to $5,000 per fundraising event or mailing. Source: IRS Publication 1771 and the IRS page on quid pro quo contributions.

Publication 1771's example is a $100 payment for a concert ticket worth $40. The deduction is at most $60, and the disclosure is required because the payment is over $75, even though the deductible part is not.

The $250 acknowledgment still applies

A single gift of $250 or more also needs the regular written acknowledgment. When goods or services were provided, that acknowledgment must describe them and give a good-faith estimate of their value. In practice one letter can do both jobs: list the payment, describe what the donor received, state its value, and say that only the amount above that value may be deductible. That is what each disclosure line in the example does.

Estimating fair market value

Fair market value is what the donor would pay for the same thing outside a charity event. For a dinner, that is usually what a comparable meal at a comparable restaurant costs, not what the event cost you to put on and not the ticket price. For an auction item, it is the item's retail value. Decide the values before the event if you can, so they appear in the invitation or on the bid sheet as well as in the year-end letter.

Some benefits do not need to be valued:

• token items of small value, such as a mug or calendar with your logo, under the IRS low-cost-article and insubstantial-benefit limits, which change every year;
• some membership benefits given for an annual payment of $75 or less;
• intangible religious benefits, such as admission to a worship service.

Publication 1771 explains each exception. If a payment buys only goods with no gift in it, such as a $60 ticket worth $60, there is nothing to acknowledge as a contribution.

How to record it so the letters are right

Add two columns next to the amount in your gift spreadsheet:

• Goods value: the fair market value of what the donor received for that payment, or blank if nothing.
• Goods description: what they received, in words the donor will recognize ("two dinner tickets to the Harvest Gala").

Headers with words like "goods", "services", "FMV", "fair market" or "benefit" are recognized, and you can match any column by hand in step 2. For every gift with a value, the letter then:

• switches the general sentence to "Except as described below, no goods or services were provided…", so the letter does not contradict itself;
• adds one disclosure line for that gift with its amount, date, the description and the estimated value, and the limit on the deductible amount;
• still lists the full payment in the gift table, because that is what the donor paid.

A payment whose goods value equals or exceeds the amount is kept out of the letters and listed as a purchase. A goods value without a description is flagged, because the letter could then only say "goods or services".

Honest limits

• The tool does not estimate values. It prints the values you enter.
• It prints the disclosure for every gift with a goods value, including payments of $75 or less, where the $75 rule does not require it. The line is still accurate.
• A letter sent in January may be the year-end acknowledgment, but the $75 disclosure can also be due at the event. Check whether your invitations or receipts already gave it.
• Auction purchases, raffles and sponsorships each have their own questions; raffle tickets, for example, are generally not deductible at all. Ask a tax professional about your event.

For the rest of the acknowledgment, see what a donation acknowledgment letter must include. For the full letter text, see the statement template.

Giving Receipts turns the records you provide into letters. It does not give tax, legal or accounting advice and is not affiliated with the IRS. For your organization's situation, ask a tax professional. Sources and how we use them: About and sources.