What Is a Quid Pro Quo Contribution?
When a payment to a charity provides a benefit in return, part is a gift and part is a purchase. Learn how this distinction affects your tax deduction.
A quid pro quo contribution is a payment made to a charitable organization where the donor receives something of value in return. This means the payment is partly a contribution and partly a purchase of goods or services. A common example is attending a fundraising dinner; a portion of the ticket price is for the meal and entertainment, while the remainder is a donation to the charity.
The Internal Revenue Service (IRS) has specific rules for these situations, ensuring that donors only claim a charitable deduction for the portion of their payment that represents a gift. This transaction involves both a gift and a return benefit.
Calculating the Charitable Deduction
When a donor makes a quid pro quo contribution, the amount they can deduct on their federal income tax return is not the full payment. The deductible charitable contribution is the total amount of the payment less the fair market value (FMV) of the goods or services received. The charity provides the value of the benefit in a disclosure statement.
To illustrate, consider a donor who purchases a ticket to a charity gala for $200. If the fair market value of the dinner and concert provided is $80, the donor can claim a charitable deduction of $120. This is calculated by subtracting the $80 FMV from the $200 payment.
This logic applies to items won at a charity auction. If a supporter bids $1,500 for a vacation package with a stated fair market value of $1,000, their deductible contribution is $500. The deductible amount is the excess of the payment over the value of the item received.
Charity Disclosure Requirements
Charitable organizations have obligations when they receive quid pro quo contributions. If a donor makes a payment exceeding $75 that is partly a contribution and partly for goods or services, the charity must provide the donor with a written disclosure statement. This disclosure must be furnished either at the time of solicitation or upon receipt of the donation.
The written statement must inform the donor that their deductible contribution is limited to the excess of their payment over the value of the goods or services provided by the charity. It must also include a good-faith estimate of the fair market value of those goods or services.
Failure to provide this disclosure can result in penalties for the charitable organization. The IRS can impose a penalty of $10 per contribution, with a maximum penalty of $5,000 per fundraising event or mailing.
Exceptions for Insubstantial Benefits
There are exceptions for situations where the benefit received by the donor is of insubstantial value, allowing the donor to deduct the full payment. For 2025, a benefit is a “low-cost article” if the donor’s payment is at least $68.00 and the cost of the item does not exceed $13.60. A benefit is also insubstantial if the total fair market value of all benefits received is not more than 2% of the donation, or $136.00, whichever is less.
These exceptions also apply to certain annual membership benefits provided for a payment of $75 or less. If these benefits consist of rights or privileges that can be exercised frequently, such as free admission to a museum or discounted parking, they may be considered insubstantial. Admission to member-only events where the cost per person is low also falls under this exception.