In-Kind Donations: Complete Guide for Nonprofits and Donors

In-kind donations -- non-cash contributions of goods, services, or property -- represent a significant and often undervalued revenue stream for nonprofits. They also create some of the most complex tax and accounting situations in nonprofit finance.

Types of In-Kind Donations

Goods and Materials

Physical items donated to support the organization's mission: food, clothing, office supplies, furniture, equipment, vehicles, computers. These are the most common in-kind gifts.

Professional Services (Pro Bono)

Donated professional services: legal counsel, accounting, graphic design, consulting, marketing, photography. Under current accounting rules (ASU 2020-07), nonprofits must recognize contributed services that require specialized skills.

Use of Facilities

Donated use of meeting space, office space, warehouse space, or event venues. The fair rental value can be significant.

Intellectual Property

Donated patents, copyrights, trademarks, or software licenses.

Valuation: What In-Kind Donations Are Worth

For the Nonprofit (Accounting)

Nonprofits must record in-kind donations at fair market value -- what a willing buyer would pay a willing seller in an arm's length transaction.

Goods: Fair market value is typically the price the item would sell for on the open market in its current condition. Not retail price for used items.

Services: Fair market value is what the service provider would normally charge. A lawyer donating 10 hours at a $300/hour rate represents a $3,000 in-kind contribution.

Facilities: Fair rental value for comparable space in the same market.

For the Donor (Tax Deduction)

The donor's tax deduction depends on the type of property donated:

Ordinary income property (inventory, short-term capital gains property): Deductible at the lower of fair market value or cost basis.

Long-term capital gains property (appreciated stock, real estate held over one year): Generally deductible at fair market value.

Used household items and clothing: Must be in "good or better" condition. Fair market value is typically the thrift store or resale price, not original purchase price.

Vehicles: If the nonprofit sells the vehicle, the deduction is limited to the sale price. If the nonprofit uses the vehicle, the deduction is fair market value.

Tax Documentation Requirements

For Donations Under $250

The donor needs a receipt or record showing the organization name, date, location, and description of the donated property.

For Donations of $250-$500

Written acknowledgment from the nonprofit stating the description of property donated and whether any goods or services were provided in exchange.

For Donations of $500-$5,000

The donor must file Form 8283 (Section A) with their tax return, describing the property, how it was acquired, its cost basis, and fair market value.

For Donations Over $5,000

The donor must obtain a qualified appraisal by a qualified appraiser and file Form 8283 (Section B). The nonprofit must sign Part V of Form 8283. Exception: publicly traded securities do not require an appraisal.

For Donations Over $500,000

The appraisal must be attached to the donor's tax return.

For cash donation receipts, see our donation receipt template. For tax deduction rules, see our charitable donation tax deduction guide.

How Nonprofits Should Manage In-Kind Donations

Create an Acceptance Policy

Not all in-kind donations are helpful. A clear policy should address:

• What items you will and will not accept
• Condition requirements for used goods
• How you handle donations that come with restrictions or conditions
• Who has authority to accept large or unusual donations
• How you handle donor valuation disagreements

Track and Record Properly

• Record all in-kind donations in your accounting system at fair market value
• Maintain documentation of how valuations were determined
• Report in-kind donations on Form 990 (Part VIII, Line 1g for non-cash contributions)

Acknowledge Promptly

Send written acknowledgment within 48 hours of receiving any in-kind gift. Include:

• Description of the donated property (do NOT include a dollar value -- the donor determines value for tax purposes)
• Statement of whether goods or services were provided in exchange
• Date the donation was received

Critical: The nonprofit should NEVER state the value of a non-cash donation in the acknowledgment letter. Valuation is the donor's responsibility.

Common Mistakes

Nonprofits stating the value of in-kind gifts. This creates potential liability. Describe the item; do not value it.

Donors overvaluing used items. That five-year-old couch is worth the thrift store price, not the original retail price.

Not tracking in-kind donations. They represent real revenue and should be recorded in your financial statements and reported on Form 990.

Accepting everything. Donated items that cost more to store, transport, or dispose of than they are worth create a net cost to the organization.

Missing appraisal requirements. Donations over $5,000 require a qualified appraisal. Without it, the IRS will deny the donor's deduction.

Tangible Takeaway

Two actions: For nonprofits -- create a one-page in-kind donation acceptance policy that specifies what you will accept, condition requirements, and who can approve. For donors -- before claiming any non-cash deduction over $500, check IRS Publication 526 and Form 8283 requirements. The most common audit trigger for individual taxpayers is overvalued non-cash charitable deductions.

Frequently Asked Questions

Can I deduct the value of my time? No. The value of volunteer time is never tax deductible, regardless of the volunteer's hourly rate or expertise.

Can I deduct mileage for volunteering? Yes. The charitable mileage rate for 2026 is 14 cents per mile, plus parking and tolls.

How do I value donated clothing? At fair market value in its current condition. Thrift store prices are a reasonable guide. Items must be in "good or better" condition.

Do pro bono services count on Form 990? Professional services that require specialized skills must be recognized as revenue and expense on the nonprofit's financial statements (ASU 2020-07). They should also be disclosed in Form 990 Part III.

What about donated stock? Publicly traded stock held over one year is deductible at fair market value with no capital gains tax. This makes stock donations particularly advantageous for donors.

Can a business deduct in-kind donations? Yes. Businesses can generally deduct the cost basis (not fair market value) of donated inventory. Enhanced deductions are available for food donations to food banks.

What if we sell a donated item? If you sell a donated item within three years and the donor claimed a deduction over $5,000, you must file Form 8282 reporting the sale to the IRS.

How do we handle unsolicited donations? Create a policy. If the item is useful, accept and acknowledge it. If not, you may decline or, if already received, contact the donor about returning or disposing of it.

About the Author

Drew Giddings is the Founder and Principal Consultant of Giddings Consulting Group, with more than 30 years of experience in fund development and organizational development.

Contact Giddings Consulting Group to discuss fund development, donor stewardship, or organizational planning for your nonprofit.