Best Practices for Effective Donor Acknowledgment Letters

CPAs & Advisors

Bradley DeVries
Bradley DeVries CPA, CAE Managing Principal CPAs & Advisors

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Donor contributions are often a primary source of unrestricted funds for many nonprofit organizations. Therefore, look to acknowledgment letters as an opportunity to strengthen donor relations – use them as a means to celebrate an organization’s successes and keep donors’ contributions rolling in.

The multi-purpose acknowledgment letter

Donor acknowledgment letters are a perfect vehicle to tout program successes, thank donors for contributions to a particular function or program and, in many cases, provide the donors with the documentation they need to claim a tax deduction. As a best practice, acknowledgment letters should be sent whenever an organization receives donations of cash, goods or services, regardless of the dollar amount, in order to convey the organization’s gratitude for a donor’s efforts and contributions.

Not all contributions can be deducted by a donor, but that should not preclude an organization from saying thank-you. In order for a donor to record a deduction for a contribution on their tax return, they must have written acknowledgment from the organization for all contributions over $250. Therefore, as a best practice, acknowledgment letters should be sent as soon as possible, but no later than January 31 succeeding the year of the contribution to ensure the donor will hold adequate documentation come tax time.

Letter format and components

Acknowledgment letters are not required to be in a particular format or follow a standard template. The letters may be sent via mail or e-mail; however, sending a letter via the mail adds a personal touch. Also, sending acknowledgment letters does not have to be a time-consuming, burdensome process. Many types of software are available to help organizations track contributions and generate letters. QuickBooks also has the ability to generate letters related to the contributions an organization receives. Talk to your Yeo & Yeo advisor if you are not familiar with the tools available to add efficiency to your acknowledgment letter process.

At a minimum, acknowledgment letters should include the following components:

  • The organization’s name and the donor’s name
  • A statement that the organization is a 501(c)(3) organization. Also, it is generally helpful to include the organization’s EIN.
  • Details of the contribution, including:
    • The date received
    • The amount of the contribution, when cash (which includes check, credit card and payroll deductions)
    • If not cash, a description of the good or service received. The value of the non-cash gift should not be provided. It is up to the donor to substantiate the value for non-cash donations. Further donations of services or time generally cannot be deducted by the donor.
    • Statements of good faith estimates of the value of goods or services provided in exchange for the contribution, or a statement that no goods or services were provided in exchange for the contribution, if that is the case.

Also, consider including statements as to how the contribution contributed to a particular service, or an estimate as to what it saved the organization, to add extra emphasis on how the contribution was appreciated by the organization.

Additional resources

For additional guidance regarding acknowledgment letters, refer to IRS Publication 1771 Charitable Contributions Substantiation and Disclosure Requirements.

Most people feel good about helping charitable causes. Put the organization’s acknowledgement letters to work by not only satisfying the legal requirements, but by conveying a heartfelt thank-you and creating further positive impressions, too.

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