Token Gift – A gift given by a 501(c)(3) nonprofit to a donor in exchange for a donation, where the value of the gift doesn’t exceed the maximum limit for insubstantial value as determined by the IRS. This amount, indexed by inflation, stands at $13.20 for 2024. Examples include coffee mugs, t-shirts, etc. Typically, a token gift will include the organization’s logo or other identifier that ties it to the donation. In order for the gift to be considered token in exchange, the amount of the donation should exceed the fair market value of the token gift by at least 5 times.
Example: If a token gift has a FMV at the maximum limit, the donation should be a minimum of $66 (5 x $13.20).
Low-Cost Gift – Similar to the token gift, a low-cost gift is one whose fair market value does not exceed 2% of the amount of the donation, up to a limit of $132 (2024), whichever is less.
In the example you use “If a token gift has a FMV at the maximum limit, the donation should be a minimum of $56.50 (5 x $11.30).”
Does the same hold true for token gifts that are lower in value? Let’s say the token gift was a pair of branded socks that cost $5, could that be given to a donor that gave a $25 donation without having to deduct the fair market value of the socks?
Yes, that should work, as the $25 donation is five times the value of the token $5 sock gift.