For complete details and more information, refer to:
Charitable contributions: Written acknowledgments (IRS)
Charitable contributions: Quid pro quo contributions (IRS)
The Dos and Don’ts for Charity Auctions (A. Michael Gellman, CPA, CGMA)
Hosting a charity auction for the first time? The IRS has a few requirements for “written acknowledgements”, AKA receipts, for donations to auctions. Without a compliant auction receipt, your donors can’t get (their much desired) tax deductions from their donations.
Use our Auction Receipt Checklist for U.S. Auctions to ensure your receipts are fully compliant with IRS laws.
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Create Your Auction for FreeBefore You Send Out Your Auction Tax Receipts…
A quick note while we’re talking about auction receipts: Don’t forget to check if you’re required to collect sales tax on auction items.
Many areas count auction transactions as a sale—even for nonprofit auctions. They require you to withhold the proper amount from the final bid and send the taxes to your tax authority.
Check your state, city, or county laws for specific sales tax rules.
How to Determine the FMV of Auction Items & Experiences
For receipts for item winners, you’ll need to provide the FMV of the item or experience. FMV stands for Fair Market Value. It’s the price the item is worth, or more specifically, the price the item would sell for on the market.
Sometimes determining an FMV isn’t straightforward. Here’s what to do when you can’t assign an FMV to an item:
- First, determine if there’s a comparable item or service. Use that item/service to provide a “good faith estimate.” For example, a craft session with a school art teacher can be estimated by the price of a similar craft class for kids.
- BUT if there is no comparable item or service (like a “Principal for a Day” experience), there is no FMV. Your donor cannot receive a tax deduction.
Auction Receipt Checklist
The IRS has different requirements for receipts to donors who donate items for auctioning and for receipts to donors who win items from bidding.
In order for your item donors to receive a tax deduction for $250+ contributions, you must send a written acknowledgement (this includes email). But it’s best practice to send receipts for all contributions, no matter the donation size.
Item Donor Receipt Checklist:
For all item contributions valued at $250+, send a written acknowledgement that includes:
✔ Your organization’s name
✔ Your tax ID
✔ Date of the contribution
✔ The donor’s name
✔ Description of the donated item/experience
✔ Statement that “No goods or services were provided by the organization in return for the contribution.”
Do NOT include:
✘ Value (FMV) of the item/experience
✘ Statement that their contribution is tax deductible
The donor is responsible for reporting the value of their contribution. They’re also responsible for determining whether the item is tax deductible or not.
Item Winner Receipt Checklist:
When a donor wins an item, it’s considered a quid pro quo transaction. The IRS defines this as “a payment a donor makes to a charity partly as a contribution and partly for goods or services.”
A written acknowledgement must be given for quid pro quo transactions above $75 (but again, it’s always best to send a receipt for every donation).
For all winning bids above $75, send a written acknowledgement that includes:
✔ Your organization’s name
✔ Your tax ID
✔ Date of the contribution
✔ The donor’s name
✔ Name of the item/experience
✔ Good faith estimate of the FMV (Fair Market Value) of the item/experience
✔ Amount paid for the item/experience
✔ Disclosure statement that “The amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity.”
Do NOT include:
✘ Other advice on tax deductions
Notice that the donor only receives a tax deduction for the amount paid over the FMV.
Frequently Asked Questions
Do I HAVE to send tax receipts for donations?
No. The IRS won’t punish you if you don’t send auction receipts, but your donors need compliant receipts to receive tax deductions on donations over certain amounts.
The only consequence comes if you provide a receipt to an item donor but forget to provide the disclosure statement about what amount is deductible. The IRS charges penalty fees for not providing the disclosure.
What about receipts for direct donations at my auction?
Send a receipt as you typically would for any monetary donation.
What about receipts for event tickets?
Generally, event tickets are not tax deductible when the service provided (the event experience, i.e. dinner, entertainment, etc.) is worth the same as the ticket price.
BUT if you believe the event experience is worth less than the cost of tickets, then quid pro quo rules apply. So if your event ticket's FMV is $100, but you charged $300, the deductible amount is $200.
What's the deadline for sending receipts?
The IRS requires that written acknowledgements be provided by whichever date is earlier: the date the donor files their tax return, or the due date (including extensions) of that return.
In practice, sending receipts within a few days of the auction is best.
Do I need to collect sales tax on auction items?
It depends on your state. Many states exempt nonprofit auction sales from sales tax, but rules vary.
Check your state's department of revenue website or consult a CPA familiar with nonprofit compliance in your state.
Are digital/emailed receipts acceptable to the IRS?
Yes. The IRS accepts written acknowledgements for auctions in multiple formats, including email. Just make sure the receipt contains all required information and that you retain a record of having sent it.
What other records are important for auctions?
You’ll want to track key data through automated auction reports after your auction closes: financial summary, item performance, bidder activity, attendee statistics, and marketing report. Check your reporting or analytics dashboard in your software for these.
Automatic Compliance Receipting
CharityAuctions.com automatically emails receipts to donors who participated in your auction. Our receipts are built to meet IRS requirements (no checklist needed).
Simply choose your country and toggle our Tax Receipt feature. Add your own custom message if you’d like, and you’re all set. We email one receipt that covers items won, direct donations, and event ticket purchases.
Register now to create your auction for free.
Or learn more about auction analytics and reporting here.
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