Posted October 1st, 2015

Taxing Matters: Token Donor Gifts

It is a well-established IRS rule that donors must reduce any charitable itemized deduction if they receive goods or services in exchange for a gift.

For example, if Henry decides to go to a charity’s gala ball and write the charity a check for $250, he can expect to receive a written acknowledgment from the charity for the value of the charitable gift, which would be $250 minus the estimated value of the meal and evening’s entertainment. If the value of those things was estimated at $75, his deduction for tax purposes would be $175.

There are some interesting exceptions to the IRS tax rules with which fundraisers should be familiar. The exception that seems to raise the most questions pertains to “low-cost articles” or “token gifts” for donors.

The IRS allows charitable organizations to give donors certain low-cost articles that do not require the donor to reduce his or her deduction or the charity to provide the value of the items. These types of items and their maximum value were first described in an IRS Revenue Procedure in 1990 and have been adjusted annually for inflation since then.

Cup of coffee and notebook isolate on white backgroundFor 2015, these low-cost articles cannot be valued at more than 2 percent of the donor’s gift or $105, whichever is less. Token items such as calendars, coffee mugs and other items bearing the organization’s logo are allowable, if this cost is less than $10.51 and the gift is at least $52.50.

Special rules apply for certain membership and religious benefits. For more information, see IRS Publications 1771 and 526.

Check out our blog for recent posts about gift substantiations for charitable deductions and tax issues related to gala dinners.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

Give & Take

Site Search

Give & Take Archives

2017 Issues 2016 Issues 2015 Issues 2014 Issues 2013 Issues 2012 Issues 2011 Issues 2010 Issues 2009 Issues 2008 Issues 2007 Issues 2006 Issues 2005 Issues 2004 Issues 2003 Issues 2002 Issues 2001 Issues 2000 Issues 1999 Issues 1998 Issues 1997 Issues