Insubstantial Benefit Safe Harbor: Token and Percentage Tests

The insubstantial benefit safe harbor lets a donor deduct the full amount of a charitable gift even when the charity hands back a small token, and lets the charity skip the usual quid pro quo disclosure. For contributions made in 2026, the IRS treats a benefit as insubstantial under either of two tests: the item cost the charity $13.90 or less and the donor gave at least $69.50, or the donor gave $139.00 or less and the benefit’s fair market value is no more than 2% of the payment (capped at that same $13.90). Both figures come from Revenue Procedure 2025-32.¹

The Low-Cost Token Test

Revenue Procedure 90-12, expanded by Revenue Procedure 92-49, set up a bright-line rule that turns on what the charity paid, not on retail value. For 2026, both conditions have to be met at the same time:

The donor’s payment is at least $69.50.
The charity’s cost to acquire or produce all benefits given to that donor totals no more than $13.90.

When both apply, the donor ignores the item on the return and deducts the whole payment. The charity documents compliance through its own purchase records.

This is the test built for the giveaways charities actually use: bookmarks, key chains, coffee mugs, tote bags, tee shirts carrying the organization’s name or logo. A branded mug that retails for $15 but costs the charity $4 in bulk stays inside the safe harbor, because the $4 is the figure that matters.

The thresholds move each year with inflation. The 2025 numbers were $13.60 and $68.00, and the 2024 numbers were $13.20 and $66.00.² If your acknowledgment templates or fundraising software still reference those older figures, update them before the first 2026 solicitation goes out.

The Percentage-Based Test

The second test looks at fair market value rather than cost, and it applies to smaller total payments. For 2026, the donor’s payment must be $139.00 or less. The benefit qualifies as insubstantial if its fair market value is no more than 2% of the payment and also stays at or below the $13.90 ceiling.¹

Fair market value is the price a willing buyer would pay a willing seller when both know the relevant facts.³ For a mass-produced promotional item, it’s usually the retail price of a comparable item.

The two tests do different work. The cost-based test can cover any donation of $69.50 or more as long as the charity’s cost stays low. The percentage-based test is capped at $139.00 in donor payment but doesn’t require the charity to know its own per-unit cost. A benefit that fails one test can still pass the other, so it’s worth running both before deciding a disclosure is required.

Items the IRS Specifically Treats as Insubstantial

Revenue Procedure 90-12 calls out several categories directly.

Newsletters and program guides can be treated as having no measurable fair market value when their main purpose is informing members about the organization’s activities. Two conditions: they can’t be sold by subscription or on newsstands to non-members, and they can’t be commercial-quality publications. A publication generally counts as commercial-quality when it contains articles written for compensation and carries advertising. Professional journals are almost always treated as commercial-quality regardless of their ad practices.⁴

Calendars, posters, and similar branded items are handled under the low-cost token test. As long as the charity’s cost per item is at or below $13.90 and the donor gave at least $69.50, the item drops out of the analysis.¹

Membership benefits get their own rule. When a donor pays $75 or less per year and receives only annual membership perks, those perks are disregarded if they consist of privileges the member can use frequently during the year, such as discounted parking or preferred access. Admission to members-only events also qualifies when the per-person cost fits within the low-cost article limits.⁵

Intangible Religious Benefits Are Separate

Contributions to religious organizations have their own carve-out that sits outside the dollar tests. When the only thing a donor receives back is an intangible religious benefit, the organization doesn’t have to value it, and the donor deducts the whole gift. The acknowledgment just says only intangible religious benefits were provided.⁶ The benefit has to come from an organization organized exclusively for religious purposes and be something generally not sold in a commercial transaction. Tuition toward a recognized degree, travel services, and consumer goods do not qualify even when a religious organization provides them.⁵

What the Safe Harbor Does to Disclosure and Acknowledgment

Two different disclosure rules bear on charitable gifts, and the safe harbor affects both.

Quid Pro Quo Disclosure Over $75

Under Section 6115, a charity that receives a quid pro quo contribution above $75 has to give the donor a written statement in connection with the solicitation or receipt. The statement must tell the donor that only the amount over the benefit’s fair market value is deductible and give a good-faith estimate of that value.⁷

When the benefit is insubstantial under Revenue Procedure 90-12, no disclosure statement is required. A $200 donor who gets a $4 branded mug can simply be told the full contribution is deductible.⁵

Written Acknowledgment at $250 and Up

For any single contribution of $250 or more, the donor needs a contemporaneous written acknowledgment to claim the deduction. It has to state the cash amount, describe any property contributed, say whether the charity provided goods or services in return, and give either a good-faith estimate of those goods or services or a statement that only intangible religious benefits were provided.⁶

When the safe harbor applies, the acknowledgment can say no goods or services were provided, or that any items provided had insubstantial value. No dollar figure is needed for token items.⁸ The wording matters at tax time; getting it wrong can put the deduction at risk even when the gift itself clearly qualifies.

Penalties for Skipping a Required Disclosure

Charities that fail to make the required quid pro quo disclosure for contributions over $75 face a $10 penalty per contribution, capped at $5,000 per fundraising event or mailing.⁹

A large direct-mail campaign hits the $5,000 cap quickly. The penalty runs per contribution, so repeat gifts from the same donor each count. Reasonable cause is a defense, but the IRS sets a high bar. The cleanest protection is running the safe harbor analysis at the point the solicitation is drafted, so the acknowledgment language is right the first time.

When the Safe Harbor Does Not Apply

If a benefit clears both tests, the donor subtracts its fair market value from the contribution. A $500 gift that includes a $75 dinner leaves a $425 deduction, and the charity has to issue the Section 6115 disclosure with a good-faith estimate of the dinner’s value.⁷

Not every giveaway is a token. Auction items, event tickets with real entertainment value, and gift baskets all require valuation and disclosure. The safe harbor exists for promotional items, not for benefits a donor would reasonably see as part of what they paid for. When the answer isn’t obvious, value the benefit and disclose it. Overestimating costs the donor a few dollars of deduction; failing to disclose exposes the charity to penalties and the donor to an audit adjustment.

1
Internal Revenue Service. Revenue Procedure 2025-32
2
Internal Revenue Service. Revenue Procedure 2024-40
3
Internal Revenue Service. Publication 561 – Determining the Value of Donated Property
4
Internal Revenue Service. Revenue Procedure 90-12
5
Internal Revenue Service. Charitable Contributions – Quid Pro Quo Contributions
6
Office of the Law Revision Counsel. 26 U.S. Code 170 – Charitable, Etc., Contributions and Gifts
7
Office of the Law Revision Counsel. 26 U.S.C. 6115 – Disclosure Related to Quid Pro Quo Contributions
8
Internal Revenue Service. Publication 526 – Charitable Contributions
9
Office of the Law Revision Counsel. 26 U.S.C. 6714 – Failure to Meet Disclosure Requirements Applicable to Quid Pro Quo Contributions