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Tax Receipts vs. Acknowledgments and Why They Are NOT One and the Same


Round wood pieces spelling out "Thank you" with teal overlay and the blog title, "Tax Receipts vs. Acknowledgments and Why They Are NOT One and the Same"

Tax receipts and acknowledgments are two of the most fundamental and crucial components of your donor relations efforts, and it’s important to understand the distinct roles and importance of both.

 

Though they seem similar—and some will argue they are one and the same— individually, they serve entirely different purposes and collectively contribute to a holistic donor experience.

 

That’s why at DRG, we stand firm in our belief that your tax receipts and acknowledgments should be sent separately, and not combined into a single message.

 

What is the purpose and format of each? And why is sending both essential to cultivating strong donor relationships?

 

What is a Tax Receipt?

A tax receipt is the formal document provided to donors as proof of their charitable contribution for tax purposes. It’s a legal requirement for nonprofits to issue these receipts when donations meet certain criteria set by tax authorities.

 

Key elements of tax receipts include:

  • Name and Contact Details - The nonprofit’s official name and address.

  • Donor’s Information - Donor’s name and address.

  • Gift Details – The gift date, amount, and designation.

  • Tax-Exempt Status – A statement confirming the nonprofit’s tax-exempt status and the receipt’s validity for tax deduction purposes.

  • No Goods or Services Exchanged – A declaration that no goods or services were provided in exchange for the donation, if applicable.

 

Why are Tax Receipts Important?

Besides being an IRS requirement, they are important to donors because they enable them to claim tax deductions on their charitable contributions. They serve as proof of a donation and ensure compliance with tax laws.

 

A Few Tips from the Pros:

  • Tax receipts should be sent within 72 hours of the time the gift was made. Three business days, no excuses. This is the industry standard and best practice for all organizations, regardless of size. You have one chance to make a great first impression after a gift is made – this is it!

  • Meet your donors where they are. If they make an online gift, don’t send them a receipt in the mail. If they mail a check, don’t email their tax information. The channel of the gift tells you how your donors want to communicate with you.

  • Make it warm. While this is a transactional and technical document, you should still infuse warmth and gratitude into your tax receipts. Don’t be afraid to include a short impact statement or story or a quote from a beneficiary. And always remember to include a genuine thank you—for their generosity, not their transaction!

  • Make it attractive. This may be the only document your donors keep for a long period of time, so invest a little time into creating something that represents your brand and mission.

Here's a great example of a well crafted tax receipt:




What is an Acknowledgment?

Acknowledgments are personalized notes expressing gratitude. They are not legally required, but are considered best practice in donor relations—what we consider a MUST-HAVE. They have two purposes—to thank the donor and make them feel good about giving.

 

An effective acknowledgment includes:

  • Personalization – Address the donor by their preferred name to create a personal connection.

  • Gratitude – A sincere thank you for their generosity (not their gift!).

  • Impact Statement — Briefly illustrate how their generosity makes a difference.

 

DO NOT include the gift amount—that’s what the tax receipt is for! 😉 

 

Why are Acknowledgments important?

They are the first step in building a lasting relationship with your donors! They make donors feel valued and appreciated, and go beyond the transactional nature of giving. Acknowledgments serve to reinforce a donor’s decision to support your cause and encourage future donations.

 

A Few Tips from the Pros:

  • Every donor should be thanked, regardless of gift amount. This is non-negotiable.

  • All donors should be thanked within 7 business days. If you aren’t there yet, make incremental changes to reduce your turnaround time.

  • Match the channel of the gift – Just like your tax receipts, online donors should get an email, direct mail donors should receive a letter or postcard.

  • Keep it short — Acknowledgments should be 3-5 sentences.

  • Get creative – Open your acknowledgment with something other than “thank you.” Alternatively try:

o   Your generosity inspires us…

o   We’re grateful for you…

o   You are making a difference…

o   Your support means so much…

o   Because of you…

  • Use donor-centered language. Thank donors for who they are, not the gifts they make. Use “you” more than “we.”

  • Acknowledge donor behavior. Show your donors you know more about them than their gift amount. A good starting point is acknowledging first-time donors. Other behavior-based examples include loyal donors, monthly donors, and employee donors.


Here are two brilliant examples of both a print and digital acknowledgment:






For more examples of acknowledgments, tax receipt, impact reports, and more, visit our free sample library.


This topic comes up so often that our team created this guide to help differentiate between the two. Print it out, hang it in your office, and refer to it anytime someone suggests you should combine the two!



 

So, why do you need both?

Sending both a tax receipt and an acknowledgment plays a dual role in donor relations. Tax receipts fulfill legal requirements and demonstrate your organization’s commitment to professionalism. Acknowledgments nurture an emotional connection with the donor, recognizing their generosity and the impact they’re making.

 

Tax receipts are a compliance necessity whereas acknowledgments are an opportunity to deepen the donor relationship. They serve two completely different purposes and should be treated as two distinct opportunities to connect with your donors.

 

The number one reason most donors don’t give again is because they don’t feel appreciated. Industry research says that you should thank a donor seven times before you ask again. So, why wouldn’t you use the tax receipt and a separate acknowledgment to achieve two of those seven opportunities to thank them?

 

The bottom line: It’s not just about meeting legal obligations—it’s about fostering a culture of gratitude and respect for your donors. In sending both, you show donors that you are doing the minimum by providing a tax receipt, but you’re also willing to go above and beyond to send them an acknowledgment celebrating their generosity because it matters—they are making a difference, and you are truly grateful for their support.  



Ashley Groneck serves as the Chief Marketing Officer at DRG and has more than 10 years of experience crafting donor communications for a variety of nonprofit organizations, including colleges and universities, healthcare organizations, and community foundations. 

 


 

 

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