What Is a In-Kind Donation 501C3?

By Jennifer Kiesewetter, J.D.

What Is a In-Kind Donation 501C3?

By Jennifer Kiesewetter, J.D.

An in-kind donation is a non-cash donation to a 501(c)(3) charity. People can make two different types of contributions to a 501(c)(3) charity: cash donations or in-kind donations. A cash donation is a transfer of funds to the organization. An in-kind contribution includes all other types of donations.

Woman in blue cardigan writing a check

Both donors and charities should understand what constitutes in-kind contributions, as well as how to value them and how taxes impact them. Here's what to know about in-kind donations to 501(c)(3) charities.

Types of In-Kind Contributions

In-kind donations include goods or services, other than cash transfers. For example, in-kind donations include products such as computers, furniture, clothing, or office equipment. Services include donating meeting space, transportation, copying services, or administrative services.

You can also donate expertise to a charity, such as providing legal or accounting services. Finally, you can give cash equivalents, such as stocks or bonds. All of these gifts constitute in-kind contributions.

Value of In-Kind Contributions

When a nonprofit organization receives an in-kind contribution, the charity records the gift as revenue. To determine the amount of revenue, the charity must value the in-kind contribution at its fair market value on the date of the donation.

For goods, you can also have the gift professionally appraised. Additionally, for services, you may use a salary survey or a competitor comparison to determine the fair market value. Once the charity decides upon a fair market value methodology, that methodology should be used and applied consistently.

Taxability of In-Kind Contributions

For individuals making in-kind contributions, donors can take a tax deduction for the fair market value of the donation. However, donors cannot deduct for any time or services contributed to a 501(c)(3) organization. The donor can only deduct the cost of any out-of-pocket expenses for which the donor has receipts.

The charity cannot provide the donor with the fair market value of the in-kind donation. Determining the value of the donation is the responsibility of the donor.

Acknowledging In-Kind Gifts

To receive in-kind donations, charities should establish a process for accepting, documenting, and recognizing such contributions. Charities should acknowledge in-kind gifts, along with a description and the value of the donation, by submitting an acknowledgment of the in-kind gift to the donor.

To do this, charities can draft gift agreements for large or complex in-kind donations, such as providing building supplies after a natural disaster. Gift agreements outline the agreement between the charity and the donor for the provision of goods or services. Although this is not a legal document, this agreement includes the details of the parties' understanding regarding the donation, such as the description of and the intended purpose of the gift.

Additionally, a charity can create an in-kind donation form that donors can complete. Donors should record a description of the gift, the date the charity received the gift, and the estimated fair value of the donation.

Whether you're making an in-kind contribution or you're receiving an in-kind contribution as a 501(c)(3) organization, you may have questions about types and values of in-kind donations. Additionally, you may have questions about the taxability of such contributions. To receive further guidance on in-kind donations, you should consult with an attorney or use an online service provider for assistance.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

Ready to form a nonprofit?

Get started now