Planning a first fundraising event

This guide is for charities thinking about their first fundraising event: a dinner, a fun run, a trivia night, an auction. Events can build community and bring in new supporters. They can also eat months of volunteer time and lose money. After reading, you'll be able to do honest math on whether an event is worth it, avoid the legal traps around raffles and games, and give donors the tax information the IRS requires.

First, ask why you want an event

Events do several jobs. Be clear which one matters most to you:

• Raising money. Net income after all costs.
• Finding new supporters. Guests who might give again later.
• Thanking and keeping donors. A chance to say thank you in person.
• Raising awareness. Getting your name known locally.

An event that loses a little money but brings in 40 new names for your donor list might still be worth it. An event that raises a little money but burns out your three best volunteers might not. Decide what success means before you start.

The honest math

Many first events look good on paper and disappoint in real life. Work through the numbers before you book anything.

Say a small charity plans a dinner for 100 guests (a hypothetical example):

Now be honest about the risks. What if only 60 people buy tickets? Catering may still charge for a minimum number. What if the sponsor money falls through?

Then count the hours. If ten volunteers each spend 30 hours, that's 300 hours for $4,200. Could the same people raise more by each personally asking five friends for a gift? Sometimes the answer is yes.

Ways to make the math work

• Get the venue or food donated, or ask a sponsor to cover them.
• Keep the first event small and simple. Grow it if it works.
• Add a direct ask during the event: a short, heartfelt talk followed by a clear request.
• Set a break-even point: the number of tickets you must sell to cover costs. Track it weekly.
• Follow up with every guest afterward. The event is the start of a relationship, not the end.

Raffles, games and gambling need permits

This is where many small charities get into trouble without meaning to. Raffles, bingo, casino nights and similar games of chance are a form of gambling. States regulate them, and the rules vary a lot from state to state. Some states require a license or registration, some limit who can run games, some ban certain games entirely, and some add rules at the city or county level too.

Here's one example. In New York, the State Gaming Commission says that charities running a raffle with expected net proceeds of less than $5,000 don't need to register with the Commission. If the raffle is expected to raise $5,000 or more in net proceeds, the charity must get a Games of Chance Identification Number from the Commission, which is a first step before getting a license from the local municipality. Other states have completely different rules.

Gaming also has federal tax rules. IRS Publication 3079 explains that income from gaming may count as unrelated business income unless an exception applies, such as games run with almost all volunteer labor. It also explains when you must report prize winnings to the IRS and withhold tax. Read it before you offer large prizes.

Tickets and the $75 rule

When a donor pays for an event ticket, part of the payment buys something (dinner, a show) and part may be a gift. The IRS calls this a quid pro quo contribution: a payment that's partly a gift and partly for goods or services.

The IRS rules are:

• If a donor pays more than $75 and receives goods or services in return, you must give them a written disclosure statement.
• The statement must tell the donor that only the amount above the fair market value of what they received is deductible, and give a good-faith estimate of that value.
• You can give the statement when you ask for the money or when you receive it. Printing it on the ticket or invitation is common.
• The penalty for not doing it is $10 per contribution, up to $5,000 per fundraising event or mailing, unless you show reasonable cause.

The IRS gives this example: a donor gives $100 and receives a concert ticket worth $40. The deductible part is $60. Even though $60 is less than $75, you still need a disclosure, because the total payment is more than $75.

"Fair market value" means what the item would normally cost to buy. For a dinner, use what a similar meal would cost at a similar venue, not what you paid.

There are exceptions, for example for items of very small value. Publication 1771 lists them.

Auctions

IRS Publication 526 explains that a buyer at a charity auction who pays no more than an item's fair market value hasn't made a deductible gift. Only an amount paid above that value can count. Publish a fair value for each item in your auction catalog so bidders know.

The same publication lists the cost of raffle tickets among things donors can't deduct. Don't call raffle tickets "tax-deductible."

Gifts of $250 or more

Separately, any single gift of $250 or more needs a written acknowledgment for the donor to claim a deduction. Our guide on building a donor base explains what it must say.

Sponsors

Local businesses often sponsor events in return for having their name or logo shown. That's usually fine, but there's a line between thanking a sponsor and advertising for them. Our guide on corporate partnerships explains the difference.

Event planning checklist

• We agreed what success means: money, new supporters, or both
• We built a budget with a worst-case version
• We know our break-even number of tickets
• We checked state and local rules for any raffle or game
• We have event insurance or checked our policy covers it
• Tickets over $75 carry the IRS disclosure with a fair value
• Auction items have a published fair value
• We have a plan to thank and follow up with every guest

If you want help planning your first event, ask a member charity for help through the Exchange.