Your Complete Guide to In-Kind Donations

“I wish there were a way for kids to play sports with no equipment,” Arielle half-joked to her office mate Mike as she placed yet another order for jump ropes and mitts for their nonprofit, Kids Sports.

“I think that’s just called ‘running’,” he replied.

“Nope, even running ultimately requires shoes,” she said. “And it all costs so much.”

The nonprofit they worked for ran sports programs for at-risk youth all over the city and already stretched its budget.

“Can’t we get Nike to donate a truckload of shoes?” Mike asked. “Or even Moe’s Discount Shoe Emporium?”

That got Arielle thinking.

While a truck full of Nikes was probably a bit of a stretch, she hadn’t really sought any in-kind donations. Given her organization’s constant need to purchase sports supplies, that had potential.

In-Kind Donations Defined

An in-kind donation is a non-cash gift made to a nonprofit organization, including goods, services, time, and expertise. Individuals, corporations, and businesses can all make in-kind donations.

Types of In-Kind Donations

In-kind donations include physical property (stuff!), intangible property (copyrights, patents, intellectual property), services and rent-free space. Anytime someone donates an item or shares their professional expertise, you’re most likely dealing with an in-kind donation.

For example, when the hardware store donates lumber for new benches on the playground, or a graphic designer creates your logo pro bono, that’s an in-kind donation.

Benefits of In-Kind Donations

In-kind donations help nonprofits access goods and services that would otherwise be too expensive on a tight budget or else free up resources to be spent on something else. They can also be used for fundraising: as prizes in raffles, silent auctions, swag bags and fundraising incentives.

Some organizations like thrift stores, community closets, food pantries and housing organizations rely on in-kind donations as a significant part of their operations. Others have less regular in-kind needs, or only solicit them when holding a gala or fundraising campaign. That said, almost all nonprofits can benefit from accepting this type of donation.

In-kind donations are often a simpler way for businesses to give. Often they don’t have to consider their budget or cash flow as much when making these decisions. Sometimes there is excess or unsold inventory to spare. Or, businesses may have paid less for goods than they sell for, so they can afford to donate more in products than they could in cash.

Challenges With In-Kind Donations

Did your nonprofit ever receive a donation you had absolutely no use for? Or worse, one that required a big commitment you didn’t anticipate?

Of course, that donation was probably very well-intended. The donor probably felt great about giving your nonprofit their old rotary telephone, or a boat that turned out to need extensive work to be sea-worthy. Donors’ hearts are usually in the right place, but not every in-kind gift is actually useful for the nonprofit.

The problem with in-kind donations arises when they aren’t part of any strategy your nonprofit has. Unsolicited in-kind gifts can limit physical storage space. Some gifts, like real estate or vehicles, can turn out to be way more hassle than they’re worth, so proceed with caution.

You might feel obligated to accept these gifts because you don’t want to discourage generosity, but managing piles of stuff that is unconnected with your mission and need can quickly get out of hand.

Arielle was reluctant to say no to any donation, no matter what it was. That’s how she ended up with 12 cases of candy bars she didn’t know what to do with. A local company had donated them, and while Arielle appreciated the thought, she was conflicted.

“We already have a hard time convincing the kids to eat the sensible snacks we provide at practice,” she said. “Nutrition education and healthy living are a big part of our sports program, and I think handing these out would send a mixed message.”

How to Create a Gift Acceptance Policy

So how do you  avoid filling your office with things you don’t need? To help donors make the best in-kind gifts to support your mission, you’ll want a gift acceptance policy. This is a document outlining what kinds of gifts you accept—and what you don’t.

The length and detail of your gift acceptance policy depends on the size and scope of your organization, but it should include:

• The types of gifts you accept
• The types of gifts you don’t accept
• Who you accept gifts from (individuals, corporations, governments)
• The conditions of the gifts you accept (new, gently used and how to determine)
• The types of gifts are only accepted with review (your own, or legal counsel)
• How gifts will be recognized

Arielle decided to start her gift policy with a reminder about the mission.

“Kids Sports is dedicated to helping the youth of our city develop strong character and live healthy lives through sports training and athletic activities. We accept gifts and donations that help promote that mission.”

In discussion with the board, she decided not to accept food donations at all, due to storage and logistic concerns, in addition to the nutritional ones. Or, if she did, they would only be accepted if suitable for their fundraising events gift bags.

In-Kind Donations Frequently Asked Questions: Everything You Ever Wanted to Know

The best source of information about recording, acknowledging and reporting your in-kind donations is your organization’s tax professional. However, this FAQ will give you an overview of in-kind contributions and their requirements.

Are in-kind donations tax-deductible?

Your donors should consult their tax professionals, but often in-kind donations are tax-deductible for donors.

Are in-kind donations considered revenue?

Yes, a donation’s fair market value is typically recorded as revenue.

How do I document in-kind donations?

Be sure to send a receipt to your donor, for starters!

You or your accountant will also need to record an in-kind donation as a contribution at the donor’s stated fair market value in your accounting software. The fair market value of goods is determined by what the nonprofit would have paid if they had purchased the items, typically provided by the donor, if possible.

Contributed services are included in financial statements if those services:

• Create or enhance non-financial assets, or require specialized skills
• Are provided by individuals possessing those skills
• Would need to be paid for if not donated

How should I recognize in-kind donations?

Send the donor an acknowledgment that includes your tax ID number, a description of the goods and/or services they donated and the date you received them.

This letter should also confirm that donors received no substantial goods or services in exchange for their contribution. Generally, you should not assign a valuation to the goods or services—donors are responsible for that.

How do I record in-kind donations on form 990?

In-kind donations can present a significant gray area in terms of valuation. However, they may be tax-deductible for donors.

In-kind contributions of property, but not of services, should be reported on the 990. According to the IRS, these should be reported in Part VIII, line 1g, on line 1 of Parts II and III of Schedule A, in Part II of Schedule B, and in column (c) of Schedule M, if applicable. The value of donated services is shown as reconciling items on the 990.

What’s the difference between an in-kind gift and a pro bono service?

For nonprofits, “pro bono” is just another way to describe an in-kind donation of professional services. The professional gives their services for the good of the public, rather than their usual fees.

How do I figure out the value of an in-kind gift?

Donors are typically responsible for providing the fair market value of an in-kind gift when given to you. However, if that is not available, you may need to do some research.

What would your organization have paid for goods at retail? Check some stores. If someone donated their professional services, ask for their hourly rate or what they would have charged a paying client for the job they did for you.

How to Secure In-Kind Donations for Your Nonprofit

It’s the perpetual nonprofit question: How do we get these donations? To get started with in-kind gifts, consider the following:

What Are You Asking For?

Whether it’s someone fixing your front stairs, six pounds of coffee for your book clubs or a pair of tickets to your local amusement park, you should always ask yourself if donated goods or services will help save resources and further your mission.

As Arielle considered her programs, she found several opportunities for in-kind giving:

• Many of the children who participated in the sports program did not have appropriate footwear. Her nonprofit purchased shoes in these cases, spending about $1000 a year. An in-kind donation of shoes could greatly help.

• Most of the children did not have gloves and balls to practice with at home, but the organization could not afford to supply them. Maybe the local sporting goods store would make a donation, or she could launch a community drive for gently-used sports equipment.

• Local businesses like restaurants and museums wanted to support them as well, so in-kind donations of gift cards and passes could be requested for use as silent auction and raffle prizes at their annual picnic fundraiser.

• No one had updated the safety waiver in a few years, and having a lawyer review it pro bono would save resources.

Start With Those You Know

Once you know what you need, start asking! Begin with the people closest to your organization like board members, staff referrals, and volunteers.

Arielle’s first stop was her board, followed by the volunteer coaches who ran the program.

When she told everyone what she was looking for, she almost immediately heard back from one of the coaches. “My wife is a lawyer, and she would be happy to review the waiver,” he told her.

Expand Your Reach

Next, expand your search to your local community, including businesses and individuals. It helps to have an idea of how you can thank donors publicly, as some companies are motivated by having their support and engagement be visible to customers

Arielle added a “wish list” to her organization’s website and put out the call for sports equipment on her social media, email and newsletter channels. She sent a letter introducing herself and her organization to local sporting goods stores, asking for a meeting with the store manager to talk about partnering. When she followed up a week later with a phone call, one manager invited her to come in and talk.

The manager wasn’t ready to make a big shoe donation but did offer to provide water bottles for all the students. Arielle mentally reviewed her gift acceptance policy and quickly agreed to the donation.

When details for their annual picnic fundraiser were set, Arielle posted the event registration information on the website and provided her contact information for companies to reach out to if they wanted to support it. Letters were also sent to the staff and board’s favorite businesses, too.

Target Corporate Giving Programs

When you’re brainstorming fundraising ideas, “find a big company to donate” probably crosses your mind. Corporations of all sizes make in-kind gifts, and it’s worth asking about. However, for big companies, be aware that nonprofit competition for donations can be quite fierce.

Start by making a list of companies that might be a good in-kind partner for your organization. Then investigate! Do they have a “community involvement” or “social responsibility” section on their website? What kinds of gifts have they given in the past? That will help you determine if it might be possible for them to make the kind of gift you’re hoping for, and how to apply.

Arielle targeted shoe manufacturers, as well as national sporting goods stores. Then she used her nonprofit website builder to make an in-kind donation portal for donors to submit donation offers.

How To Ask For In-Kind Gifts

Asking for an in-kind gift is not radically different than asking for any other kind of support. The most important thing is to show donors the impact the gift will have—both for your organization and for them. That’s true whether the donor is an individual or the VP of Corporate Responsibility at a giant corporation.

You can ask for general in-kind gifts on your donation website, broadcast the need on social media or send an appeal to your supporters. For corporate gifts, you’ll probably need to send an email or letter explaining your need and how the donation will help, though some businesses will direct you to an online form or have a dedicated application process.

In-Kind Donations Help You Grow

With her new gift acceptance policy and in-kind strategy, Arielle was able to grow her programs and build the community around her organization. The sports equipment drive got a good response, and people donated enough to create a “practice library” of equipment that kids could take home to work on their skills.

When the candy bar donor approached her about another donation, she pointed them to the gift acceptance policy and told them they were no longer accepting food donations. To her surprise, they weren’t upset and asked if they could write her a check instead.

In-kind donations can help you stretch your resources and meet your needs. They give donors another way to give, and nonprofits another way to connect with the individuals and businesses in their communities.