Tax Deductible Donation Receipt

Brief Overview of a Tax Deductible Donation Receipt

A tax deductible donation receipt is a legal document provided by a charity organization to a donor as proof of an actual donation made to the charity organization. This receipt is then used by relevant tax authorities i.e. the Internal Revenue Service to determine the donor’s total taxable income. The tax deductible donation receipt has the net effect of reducing the donor’s total taxable income thereby reducing his or her overall tax bill.

This means that donations to charity organizations are actually tax deductible. However, to qualify for these tax deductions you must present a tax deductible donation receipt which itemizes your donations and subsequently legitimizes your claims to a tax deduction.

It is also important to note that you cannot claim tax deductions on donations made out to just any charity organization. The organization donated to must be an institution recognized by the Internal Revenue Service as a 501 (c) (3) organization.

In other words for a donation receipt to be valid as a tax deductible document then the donation for which it is written must have been made out to an organization that falls under this special category as established by the Internal Revenue Service.

However, it is still important that you receive donation receipts from all non profit organizations you donate to.

The Importance of a Nonprofit Donation Receipt

The importance of this receipt to both donors and charity organizations is immense. The reasons that give rise to this importance are stated below;
Importance to the Donor

  • The document allows the donor to seek tax deductions from the Internal Revenue Service. This will lower the donor’s tax bill and thus enable the donor to have more disposable income to meet his/her personal expenses.
  • It helps the donor to effectively maintain his/her personal records. This will enable the donor to keep track of the level of donations he/she has made out and to which charities he has made them out to. The donor will thus be able to gauge whether he/she has met his/her own expectations in terms of their intended desire to contribute towards society through their donations.
  • The records of donation receipts also provide proof of actual payments made out to charities. This is especially important when frauds are uncovered in charities and a paper trail is required to estimate the actual extent of embezzlement by employees within the charities in question.

Importance to the Charity

  • It builds a relationship of trust between the charity and its donors. The donation receipt increases the level of faith by donors in the charity which subsequently translates into increased donation levels.
  • It helps charities to meet their legal obligations as prescribed by the Internal Revenue Service. This is especially true for charities that may receive a donation worth more than $250. In such cases, the charities must automatically provide a receipt to the donor for the donation received.

Information Included in a Tax Deductible Donation Receipt

The tax deductible donation receipt must contain the following bits and pieces of information;

  • The charity’s name, address and telephone number
  • The donor’s name and address
  • The date the donation was received
  • The date the receipt was issued
  • The amount received by the charity in cases of cash contributions
  • A description of goods donated including the fair market value in cases of non cash contributions
  • A statement of whether the donation made was reciprocated by a gift to the donor from the charity

In conclusion, a tax deductible donation receipt is extremely important for anyone keen on receiving tax deductions for donations made out to charities. A tax donation receipt template is readily available for download and can be easily filled to meet regulatory requirements. Download one today.