What Is a Contribution Letter for Tax Deductions?

A contribution letter serves as official documentation of a charitable donation, important for individuals seeking tax deductions. This formal acknowledgment from a qualified charitable organization verifies the gift, providing necessary substantiation for tax purposes. It also aids proper record-keeping for both donors and the receiving non-profit entity.

What is a Contribution Letter?

A contribution letter is a formal document issued by a qualified charitable organization, typically a 501(c)(3) non-profit, to acknowledge a donation received. It serves as official proof of a charitable contribution, necessary for a donor to potentially claim a tax deduction. The letter confirms the actual receipt of funds or property by the organization.

Charities issue these letters to ensure compliance with Internal Revenue Service (IRS) regulations, while donors rely on them for accurate record-keeping and to substantiate their deductions. For the donor, this document provides evidence of their donation. Without this official acknowledgment, claiming a deduction for certain contributions becomes impossible under federal tax law.

Essential Information for Tax Purposes

For a contribution letter to be valid for tax deductions, it must contain specific information as mandated by the IRS. The letter must state the name of the organization and include the exact amount of any cash contribution or a detailed description of any non-cash contributions.

The document must specify the date the contribution was received by the organization. It must also state whether the donor received any goods or services in return for their contribution. If goods or services were provided, the letter must include a description and a good faith estimate of their value.

How Charities Provide Letters

Charities are required by the IRS to provide a contemporaneous written acknowledgment for any single contribution of $250 or more. While no specific IRS form exists, a letter, postcard, or computer-generated form is acceptable. This acknowledgment is “contemporaneous” if the donor receives it by the earlier of the date they file their tax return for the year of the contribution or the due date (including extensions) of that return.

These letters can be delivered through methods including postal mail, email, or secure online donor portals. Many non-profit organizations aim to send out these acknowledgments by January 31st of the year following the donation. While charities are not penalized for failing to provide these acknowledgments, donors cannot claim deductions for contributions of $250 or more without them.

Utilizing Your Contribution Letter for Taxes

Once you receive a valid contribution letter, it becomes an important record for your tax preparation. You generally do not submit the actual contribution letter with your federal income tax return. Instead, you must retain this document for your personal records, as it serves as substantiation in case of an IRS inquiry or audit.

For most taxpayers, charitable contributions are reported on Schedule A (Form 1040), Itemized Deductions. Cash donations are typically listed on a specific line of Schedule A, while non-cash donations are reported on another. If your non-cash contributions exceed $500, you may also need to complete and attach Form 8283, Noncash Charitable Contributions, to your tax return.