Are Gala and Raffle Tickets Tax Deductible? Event Rules

A gala ticket is deductible only for the part you pay above the fair market value of what you get. On a $500 ticket that includes a $150 dinner, open bar and gift bag, $350 is deductible. Raffle tickets aren’t deductible at all, because the ticket buys a chance to win a prize, not a gift to the charity. For the nonprofit, that split decides what goes on each donor’s receipt, and getting it wrong misstates the donor’s deduction.

How are fundraising event payments split?

When a donor buys a ticket to a fundraising event, the payment has two components: the fair market value (FMV) of whatever the donor receives (dinner, drinks, entertainment, gift bag, parking) and the excess over that FMV, which is the charitable contribution. The donor’s deduction under IRC 170 is limited to the excess. If a $500 ticket buys a $150 dinner experience, the deductible portion is $350.

The organization determines the FMV of the goods and services provided to each attendee. This is not the organization’s cost; it is the price the donor would pay for the same goods and services in a commercial setting. If the gala dinner includes a three-course meal at a hotel ballroom, the FMV is what a comparable dinner at that hotel would cost (not what the organization negotiated as a bulk rate). Live entertainment, open bar, valet parking, and gift bag contents all add to the FMV. The organization should obtain quotes or reference comparable commercial pricing to support its FMV determination.

One exception simplifies things for low-value events. Under Rev. Proc. 90-12 (updated annually for inflation), if the FMV of the benefits received is no more than the lesser of 2% of the payment or a specified dollar amount ($139 for 2026), or if the only items received are token items costing the organization no more than the annual low-cost limit ($13.90 for 2026, for a payment of at least $69.50), the entire payment is treated as a deductible contribution. A $100 donor receiving a $5 tote bag qualifies; a gala ticket does not.

What’s the quid pro quo disclosure requirement?

IRC 6115 requires the organization to provide a written disclosure to any donor who makes a quid pro quo contribution exceeding $75. A “quid pro quo contribution” is a payment made partly as a contribution and partly as payment for goods or services. The disclosure must state two things: that the amount of the contribution deductible for federal income tax purposes is limited to the excess of the payment over the FMV of the goods or services provided, and the organization’s good-faith estimate of that FMV.

The disclosure must be made “in connection with” the solicitation or receipt of the payment. Most organizations include it on the event invitation, the ticket confirmation email, or both. Including it on the invitation is better because it informs the donor before they pay. The penalty for failure to provide the disclosure is $10 per contribution, up to $5,000 per event or mailing (IRC 6714).

A typical disclosure reads: “The fair market value of goods and services provided is estimated at $150 per person. Only the amount exceeding $150 is deductible as a charitable contribution.” The exact wording is flexible, but both required elements (the deductibility limitation and the FMV estimate) must be present. The quid pro quo rules do not apply to payments of $75 or less, payments where the donor receives only intangible religious benefits, or token benefits within the Rev. Proc. 90-12 thresholds.

How are charity auctions taxed?

Charity auctions, both live and silent, follow a different tax logic than ticket sales. The critical distinction is between items the organization purchased and items that were donated to the organization for the auction.

Donated items. When a donor contributes property to the organization for auction, the donor may claim a charitable deduction, but often for less than the item’s FMV (subject to the substantiation and appraisal requirements under IRC 170 and IRC 170(f)(11)). Selling an item at auction is an “unrelated use” of it, so a donor of appreciated tangible personal property (art, jewelry, collectibles) deducts the smaller of cost basis or FMV, and a business donating its own inventory also deducts the smaller of cost or FMV (IRC 170(e)(1); IRS Pub. 526). For items valued at $250 or more, the donor needs a written acknowledgment from the organization. If the deduction claimed for an item is more than $5,000, a qualified appraisal is required (with exceptions such as publicly traded securities and inventory). The price the item later fetches at auction doesn’t set the donor’s deduction.

The winning bidder. This is where nonprofits and donors often get confused. The winning bidder generally cannot deduct any portion of their bid because they are purchasing property at a price they chose to pay. If the item’s FMV is $2,000 and the winning bid is $2,000, the deductible contribution is zero. If the bid exceeds FMV (paying $3,000 for an item worth $2,000), the $1,000 excess is a deductible contribution, but the organization must disclose the FMV. The IRS stated in Publication 526 that a bidder can deduct only the excess of their bid over fair market value. The organization should provide its good-faith FMV estimate in the auction catalog or acknowledgment letter.

Purchased items. When the organization buys items for the auction rather than receiving donations, the tax treatment for the winning bidder is the same: no deduction unless the bid exceeds FMV. On the organization’s side, the purchase cost is a fundraising expense, netted against gross auction revenue on Form 990, Schedule G.

What about silent auctions compared to live auctions?

The tax rules are identical for both formats. Whether the bidder writes a number on a bid sheet or raises a paddle, the bid is a purchase of the auction item, and only the excess over FMV (if any) is a deductible contribution. The difference is practical: silent auctions tend to involve lower-value items where the winning bid rarely exceeds FMV, so there is usually no deductible component. Live auctions often feature high-value experience packages where bidding can run well above FMV, creating a deductible excess.

A common mistake is treating the entire winning bid at a silent auction as a donation and issuing an acknowledgment for the full amount. This is incorrect and can expose the donor to an accuracy-related penalty. The acknowledgment should state the item’s FMV and note that only the excess is deductible.

How are donated auction items valued and acknowledged?

The organization must provide a written acknowledgment to the donor of each auction item valued at $250 or more, per the general substantiation rules under IRC 170(f)(8). The acknowledgment should describe the property donated (do not assign a dollar value in the acknowledgment letter if the item is property rather than cash, because the donor is responsible for determining FMV), state whether the organization provided any goods or services in exchange (typically none for a donated auction item), and be provided before the donor files their tax return for the year of the contribution.

When a donor claims a deduction of more than $5,000 for an item, the donor must obtain a qualified appraisal and attach Form 8283 (Noncash Charitable Contributions) to their return. The organization signs Part V of Form 8283 to acknowledge receipt but should not assign a value; the appraisal is the donor’s responsibility. The organization separately determines FMV for its own purposes (quid pro quo disclosure to the winning bidder and Form 990, Schedule G reporting). The organization’s FMV estimate and the donor’s appraised value may differ; they serve different functions.

What are the tax rules for raffles and games of chance?

Raffles occupy a legally complicated space because they are governed by state gambling laws in addition to federal tax rules. Many states require a charitable gaming license or permit, impose limits on prize values, and restrict how frequently an organization can conduct raffles. The organization should verify its state’s requirements before running any raffle or game of chance.

From the federal tax perspective, raffle ticket purchases are not deductible charitable contributions. The entire ticket price is a purchase (a chance to win a prize), not a donation. For the winner, raffle prizes are taxable income reported as “other income.” The organization must file Form W-2G when the prize is $2,000 or more (the threshold for prizes paid in 2026; it was $600 before 2026 and is now indexed for inflation) and is at least 300 times the ticket price. If the prize minus the ticket price exceeds $5,000, the organization must withhold federal income tax at 24% (IRC 3402(q)), and that applies to noncash prizes at their fair market value too. For non-cash prizes above the withholding threshold, the winner typically pays cash to the organization to cover the tax.

The organization reports raffle revenue on Form 990, Schedule G, Part III (Gaming). Raffle expenses (prize costs, printing, licensing fees) are reported on the same schedule. If the organization conducts gaming activities on a regular basis, the net income may be subject to unrelated business income tax, though occasional fundraising raffles are generally not “regularly carried on” and therefore fall outside UBIT.

How are golf tournament sponsorships handled?

Golf tournaments are a fundraising staple for many nonprofits, and the sponsorship payments they generate are often the most valuable revenue stream from the event. The tax treatment depends on whether the payment is a “qualified sponsorship payment” under IRC 513(i) or advertising revenue.

A qualified sponsorship payment is excluded from unrelated business income. The exclusion applies when the sponsor receives only acknowledgment in return: the sponsor’s name, logo, product line, address, phone number, or website displayed on a banner, in a program, on a sign at a tee box, or in other event materials. Acknowledgment can include the sponsor’s brand and logo in any size and format. What it cannot include is qualitative or comparative language (“the best bank in town”), price information (“rates starting at 2.9%”), calls to action (“visit our showroom today”), or endorsements. Once the acknowledgment crosses from “here is who sponsored this” into “here is why you should buy their product,” it becomes advertising, and the payment (or the portion attributable to advertising) is potentially subject to UBIT.

The distinction matters in practice. “Hole 7 sponsored by First National Bank” with the bank’s logo is acknowledgment. “Hole 7 sponsored by First National Bank, offering the lowest mortgage rates in the county, apply today at firstnational.com/mortgage” is advertising, and it turns the payment into potential UBIT if the event is regularly carried on (annual tournaments typically are). Sponsorship agreements should specify what the sponsor receives and be reviewed for advertising content before the event. If the sponsor wants advertising, the organization can accept the payment but should report the advertising portion on Form 990-T.

Player fees (the registration fee for each golfer) follow the same quid pro quo rules as gala tickets. The organization estimates the FMV of what each player receives (green fees, cart, meals, gift bag, prizes) and discloses that amount. Only the excess of the player fee over FMV is a deductible contribution.

What acknowledgment letters does the organization send?

Fundraising events generate multiple categories of donors, and each needs a different acknowledgment. The general substantiation requirement under IRC 170(f)(8) requires a written acknowledgment for any single contribution of $250 or more, and the quid pro quo disclosure rules under IRC 6115 apply to any payment exceeding $75 where goods or services were provided. For a detailed walkthrough of timing, format, and common mistakes, see the donor acknowledgment and tax receipts guide.

Each category gets its own letter. Ticket buyers receive the quid pro quo disclosure with the FMV of goods and services received. Auction item donors receive a description of the donated property (without a dollar value, because valuation is the donor’s responsibility). Winning bidders receive the item’s FMV and a note that only the excess of their bid over FMV is deductible. Sponsors receive confirmation of the payment and the acknowledgment benefits provided, noting the payment is deductible as a business expense under IRC 162, not as a charitable contribution. Raffle ticket buyers should not receive a charitable contribution acknowledgment because the purchase is not deductible. An organization that sends an acknowledgment treating the full auction bid as a deductible contribution is misstating the donor’s tax position and creating liability for both parties.

What should I do next?

If your organization runs fundraising events, start by reviewing the acknowledgment letters and disclosure language you currently use. Verify that ticket sale acknowledgments include the quid pro quo disclosure with an accurate FMV estimate. Confirm that auction item donors receive proper substantiation, that winning bidders are told the FMV of their items (not just the bid amount), and that raffle ticket buyers are not receiving charitable contribution acknowledgments. For golf tournaments and events with corporate sponsors, review your sponsorship agreements to confirm that the acknowledgment stays within the qualified sponsorship payment exclusion and does not cross into advertising.

• Nonprofit donor acknowledgment and tax receipts, the full substantiation and acknowledgment requirements for charitable contributions, including the $250 threshold and the penalties for overstating deductions
• Nonprofit UBIT, unrelated business income tax, which applies when sponsorship payments cross from acknowledgment into advertising or when gaming activities are regularly carried on
• Nonprofit Form 990 filing guide, the annual return where fundraising event revenue, expenses, and gaming activities are reported on Schedule G
• Nonprofit grant management and restricted funds, because event proceeds designated for a specific program must be tracked as temporarily restricted funds under ASC 958
• Nonprofit board governance and compensation, the intermediate sanctions rules under IRC 4958, relevant when board members or other disqualified persons are also event sponsors or auction purchasers
• Nonprofit fiscal sponsorship, how projects without their own 501(c)(3) status handle fundraising events through a fiscal sponsor

Related guides:

• Nonprofit Donor Acknowledgment Contribution Substantiation
• Nonprofit Employee Retention Credit Erc Eligibility
• Nonprofit Employee Vs Contractor Classification
• Nonprofit Executive Compensation Form 990 Excess Benefit
• Nonprofit Fiscal Sponsorship Tax Deductible Donations

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.