Key Elements of Nonprofit Thank-You Letters to Donors

How to write a gift acknowledgment letter that both satisfies the IRS and enhances donor engagement.

Appropriately thanking people who make charitable donations to your nonprofit is crucial, and not only for legal reasons. You've perhaps heard the many statistics about how it's cheaper to retain donors than to find new ones?

There are few faster ways to turn off and lose donors than to fall down on the job of thanking them. It essentially says, “You're just one of many, we took your money and moved on.” That's a shame, when a thank-you letter that lets donors share the excitement of what you're working toward can help cement their loyalty and increase their interest in getting further involved.

Let's take a closer look at how to make a nonprofit donor feel that your organization truly appreciates a donation, and that it makes a difference to the cause you serve—all while fulfilling your obligations to the IRS. (We're talking here about average-size donations. Major gifts should receive an even higher level of personalized response.)

Who Should Receive Thank-You Letters?

Everyone who makes a donation of money, goods, services, or their time should receive some sort of written recognition. With regard to financial or other gifts, the IRS requires nonprofits to send receipts for any donations of $250 or more—and a thank-you letter can do double duty as a receipt—but the exact dollar figure is hardly one you need to remember if you follow a policy of thanking every donor in writing.

Timing of Thank-You Letters to Donors

A charitable organization's thank-you letters should go out quickly, within no more than a few days of receiving the donation. Timely acknowledgments are both an IRS requirement and a matter of courtesy.

Even if you send an electronic receipt sent immediately upon receiving an online donation, try to follow up with a “real” letter. Such receipts are normally very brief, and do little for donor engagement.

Form of Thank-You Letters to Donors: Electronic or Snail Mail?

What type of letter your organization sends should mirror what the donor sent you. If the donation was made by mail, a return letter is appropriate. A one-page standard letter is fine, but consider varying this up with handmade cards made by your clients or showing a photo of your organization at work.

If the donation was made online, an email thank-you letter is sufficient—though its wording should be as carefully thought out as that of a “real” letter. And you should, if possible, keep track of the online donor's street address as well, for purposes of other types of engagement. This might be a more general “Thank you” at appropriate times of the year (say, a postcard at Thanksgiving), or your newsletter. And, of course, you might wish to make later appeals for donations by mail.

Whatever mode of letter you use, realize that, for IRS purposes, it doesn't need to look like a receipt or be in some official format—it will still serve as a receipt, and help the donor survive a possible audit, if you add the needed language and information described below.

How to Start the Letter

On letterhead or somewhere else, be sure to include your organization's name. (Sounds obvious, but worth emphasizing because the IRS requires it—and in an email, with no handy letterhead on top, it can be easy to forget.)

“Dear friend” or something similar is an impersonal way to lead in, and worth avoiding. It conveys the feeling that your organization can't be bothered. The salutation should instead include the person's full name. (Double check the spelling!)

Then express the main sentiment of the letter, namely your organization's thanks for the gift—either stating the amount or saving this figure for later.

Your language can be simple: “Thank you so much for your gift of,” or “I am writing to thank you for your generous gift,” and so on.

Of course, if you have the time to personalize it even more (particularly if your organization is small enough to actually know donors personally), a custom opener like, “How wonderful to not only see you at last week's event, but receive your generous donation of $75 today!" is great.

The Body of the Thank-You Letter

Here's where you can really set your thank-you letter apart from those sent by other organizations, many of which send the same old dull and tired one over and over. (Donors notice!)

First, explain how the money will be spent and will make a difference: for example, “With your help, we will be able to hire a scientist to oversee our work on the Long Coast beach cleanup.” Even better is if you can do the math and figure out what the gift will cover, such as, “Your gift will cover the purchase of 60 new eelgrass plants.”

Then tell the reader something he or she hasn't heard from you before. (And something you won't repeat in the next letter). Recent news is the obvious choice, such as, “Just last week, we saw the first turtles hatching—a site we haven't seen since the oil spill.”

If you have the ability to “segment” your donors—that is, figure out which of them come from particular groups within your organization, such as friends of board members, former students or clients, volunteers, and so on—a letter that addresses their particular interests is particularly effective.

Financial and Legal Niceties in a Thank-You Letter

To satisfy the IRS, your nonprofit needs to include various bits of information; usually done toward the close of the letter.

State the amount of the gift or the type of property received (no need to estimate value here), as well as the date your organization received it. Indicate that your nonprofit is a Section 501(c)3 nonprofit and that the donation may—emphasis on "may," not "will"—qualify as a charitable deduction for purposes of federal income tax.

Be careful of veering into giving tax advice; it's best to encourage donors to check with their tax advisers or the IRS to determine whether a contribution is, indeed, tax deductible. (Never say outright, “your tax deductible gift” or “your gift is tax deductible.”)

Also a requirement, in cases where the gift was for $75 or more, is to state whether the donor received anything in return—and, if it's not a token item, what the fair market value of that return gift was. (What counts as “token” changes every year; check Nolo's fundraising updates for the latest. Here's the 2016 definition.)

The donor will need to reduce his or her tax deduction by the fair market value of any substantial return gift—for example, by how much the hotel stay that he or she bid on at your silent auction normally costs.

It's helpful to add this language near the bottom: “Please keep this written acknowledgment of your donation for your tax records.”

For more information on the above, see Tax Deductions for Charitable Giving--The Nonprofit's Responsibilities.

Closing Your Thank-You Letter

A last personal thought is good towards the end, to reemphasize how much you value the donor and his or her relationship to your organization.

This can be generic (“Many thanks again, you are truly making a difference in the lives of young disabled people”), or specific (“We hope to see you at our upcoming gala dinner!”). Just make it heartfelt. You'll enjoy writing it, and the donor will enjoy receiving it.

Who should sign? It's best to have the name and signature of your executive director, development director, or someone equally high up in the organization at the bottom of the letter. Better still, with snail mail, is if that person can pen a personal note of thanks in the margin.

For more guidance on working with individual donors, see Effective Fundraising for Nonprofits (Nolo).

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