Whether you're a church treasurer or a new pastor, understanding the ins and outs of church donation receipts is essential.

These receipts not only serve as a token of gratitude from your church but also play a pivotal role in tax benefits and compliance.

In this post, we delve into the intricacies of this often-overlooked aspect of church financial management. From the crucial elements of a proper receipt to how it impacts your members, we provide you with a comprehensive resource to navigate the world of church donations and ensure your contributions make a meaningful difference.

What is a donation receipt?

A donation receipt is a document that a church or nonprofit organization provides to donors to acknowledge and confirm a donation they have made. It's also an opportunity to thank your supporters and encourage more donations.

Sometimes a donation receipt is called a...

• Contribution statement
• Giving statement
• Donation acknowledgement
• Support letter

Whatever name your church calls it, it is the document you send to your donors and supporters to thank them for their contribution and that they can use when filing their taxes.

Why is a donation receipt important?

Your members need written proof of their donations in order to claim them on their tax return. Without a donation receipt, they cannot file their generous support during tax season in exchange for the donation.

It's also important to let your donors know that you don't take their support for granted. Giving them a letter that thanks them for their support and details how your church used their money will go a long way to maintain their trust and support.

What information should be included in a donation receipt?

Every church is different. Your church may need to include information on the contribution statement that other churches don't. However, most churches will need to include a few items on their statements.

Here are the 5 things every donation receipt needs:

1. Ministry name, logo, and address
2. Donor name and address
3. A note of thanks
4. Donation details
5. Total amount

As long as you include these 5 things, your donors have what they need during tax season.

What are the legal requirements for issuing donation receipts?

A nonprofit donation receipt is important because according to the IRS Publication 1771...

The IRS leaves it up to donors to obtain this document. However, it's best for churches to produce these receipts for donors regardless if the donor requests it. That's because transparency and open communication with your donors is always a plus!

And it won't take more than a couple minutes of your time if you're using a church donation software like ChurchTrac! Donation receipts are created for you with just the click of a mouse.

What is the difference between cash and in-kind donation receipts?

A cash donation is exactly what the name implies. It's a donation made with cash! Of course, this also includes donations made by check, debit card, or credit card.

An in-kind donation is simply any non-monetary donation. In other words, anytime someone gives the church tangible items like clothes, canned food, furniture, or gift cards, these must be recorded as in-kind donations.

How can nonprofits ensure their donation receipts are tax-deductible?

To the donor, the main benefit of donation receipts is filing a tax deduction. So it's important for churches and ministries to make sure the donations are tax-deductible.

Below are the 9 things you need to do to make sure these receipts are tax-deductible:

1. Obtain Tax-Exempt Status: To be eligible for tax-deductible donations, a church must have tax-exempt status under the country's tax laws. In the United States, this typically involves obtaining 501(c)(3) status from the Internal Revenue Service (IRS).
2. Provide Accurate Info: Donation tax receipts should include accurate and complete information, such as the nonprofit's legal name, address, and tax identification number (EIN in the United States). Any errors or omissions can lead to problems with tax deductibility.
3. State No Goods or Services Were Provided: The receipt should explicitly state that no goods or services were provided to the donor in exchange for their contribution. If any goods or services were provided, it doesn't count as a donation.
4. Include Date and Donation Amount: The receipt must include the date of the donation and the exact amount donated.
5. Signatures: The receipt should be signed by an authorized representative of the nonprofit organization, such as an executive director or a board member, to add an element of authenticity.
6. Keep Detailed Records: Churches should maintain detailed records of all donations received, including the donor's information, donation date, and amount. Using a church giving software makes this easy.
7. Communicate with Donors: Ministry leaders should be willing to communicate with donors and address any questions or concerns regarding the donation receipt. Open and transparent communication fosters trust and compliance.
8. Follow Local Tax Laws: Nonprofit organizations should be aware of and comply with local tax laws and regulations regarding charitable donation receipts, as these can vary by location.
9. Seek Professional Guidance: It's advisable for nonprofits to seek legal and accounting guidance to ensure compliance with tax laws and regulations related to donation receipts. This is especially important when dealing with complex donations or issues that may affect deductibility.

Not every donation is tax-deductible, however. To learn more about how to determine if a donation is tax-deductible, watch the short video below!

How to create a donation receipt for your church?

The best way to create a donation receipt is to record all donations throughout the year in your church giving software. This allows you to track your income throughout the year, while also preparing you to produce the donation receipts for tax season easily.

At the end of the year, log into your church contribution software and generate a report that displays every donation made by each donor. As long as the report has the details listed in the "What Information Should Be Included In A Donation Receipt" section above, this report will be your donation receipt.

What are the best practices for issuing year-end donation receipts?

Before producing your donation receipts, provide donors with the chance to update their address and contact information. That way, you can guarantee that these documents are sent to the right place.

The easiest way to get year-end donation receipts into the hands of your supporters is via email. Your church donation software should give you the ability to both produce these documents and send them to each donor in an email right from your account.

However, the best practice for delivering year-end donation receipts is to both email and print these statements to put in the mail. That way, your church makes sure everyone gets their document.

How to handle specific types of donations?

While every donation helps your church accomplish its mission, not all donations are created equal! Different types of donations have unique requirements for how you record them.

What are the receipt requirements for in-kind donations?

In-kind donations are added to the donation receipt just like cash donations. However, there is one key difference regarding how you record these donations.

When recording in-kind donations, you must enter the amount as $0. You CANNOT list the market value of the item in the receipt. It is up to the donor to know the market value of the item and write that off on their taxes.

All you need to do is label the donation as in-kind, then leave a note or memo that mentions the item(s) the donor provided. That's all the donor needs to make a tax deduction.

Watch this video where we cover everything about in-kind donations, especially best practices for handling in-kind donations:

What information should be included in a receipt for cash donations?

In addition to the donor's name, a donation receipt needs to display the date and amount of the donation, as well as the donation category. If the donor used a check for the donation, include the check number. A note or memo won't be necessary for most donations but should be included when more details are necessary, as with in-kind donations.

What are the best practices for handling multiple donations from the same donor?

The best way to record multiple donations from the same donor is to have donation software that allows you to create a profile for that donor to track their donations over time.

This allows you to apply every donation they make to their profile, making it easier to see how much they have donated and to produce a donation receipt that lists every single donation that they have made over the past year (or whatever time period you need to review).

Make your donation receipts more effective

Donation receipts are more than a year-end chore for you and your team. They're an effective way to show how much you appreciate your donors and build their confidence in your ministry!

By following this complete guide, you can ensure that your documentation meets the requirements for your donors to file their taxes and continue supporting your ministry for years to come.

Matt Church Engagement