Updated: Jun 29, 2022
If you're a 501(c)(3), there are some important things to know about receiving and managing donations! Here's a few (but not all-inclusive) thoughts for you:
The IRS requires that any donation over $250 be given a donation receipt (although, it's good practice to give a receipt for all donations). For cash donations, you can and should write the amount (value) of the contribution on the donation receipt. For any in-kind (contributions of goods or services-other than cash) donation over $250, you cannot write in the value of the donation--the donor has to determine the value of their donation themselves. For a sample donation receipt, click HERE.
Be cautious when offering goods or services to a donor in return for their donation (a few exceptions to this includes giving membership benefits to donors including discounted parking or admission, or "token" benefits like water bottles, stickers, and t-shirts). If the donor receives any kind of benefit or service in return for their donation, it is likely that some or all of their donation is NOT a donation after all. For example, if you purchase 2 tickets to a basketball game for $250 from a fundraiser, but the face value of each ticket is $100 each, then you really paid $200 for the tickets and the value of your donation was only $50. In this case, you would change the wording on the donation receipt from "No goods or services were provided in exchange for this contribution," to, "You were provided with _____________ (name the good/service) with a fair market value of ______. After reducing the donation amount by the value of the goods/services received, the amount eligible for a federal income tax deduction is $_____.”
What about program fees, tuition, and registration? Are those considered a donation?No, these are paid in exchange for a service provided and are not tax deductible. What about the child dependent care tax credit? Can tuition count towards that? The short answer is not unless it's for a child under kindergarten age or for before/after school care AND the parents must be working or looking for work during that time. Read this blog post for a more detailed explanation (I have this post bookmarked so I can quickly and easily send it to participating parents when they ask this question).
When someone donates their time, it is NOT considered a donation.
"...thank your donor for their services, but do not give them a tax deductible receipt for the value of their services. Donors cannot take a deduction for the time that they donated. Only donations of cash, tangible and intangible goods are tax deductible, not the value of services." Accepting in-kind donations of equipment or services | HomeschoolCPA.com
A donation is only tax deductible if it's given to a 501(c)(3). A group may be a nonprofit organization in their state, but they must have 501(c)(3) status with the IRS for that tax deduction.
If you have further questions or would like more information about my services to help groups apply for 501(c)(3) status, you can schedule a consultation with me at www.homeschoolleaders.com/book-online.
Keep up the good work, Homeschool Leader!!