In-kind donations are a unique form of donation that involves donating goods or services rather than money. Most nonprofit organizations rely on donations to keep their organization running. While most donors that contribute to a nonprofit do so through one-time or monthly direct donations, a few donors might consider offering up goods or services instead.
Typical types of in-kind donations
There are three general types of in-kind donations that donors commonly make:
- Donation of physical goods. This could be old or new furniture, gently used clothing, household appliances, or food and other perishable items. Some organizations also encourage donations of other physical goods like old cars, real estate, etc.
- Donation of services. Some professionals might offer up their services to a nonprofit as a form of donation. This could be professional services like consulting, administrative work, marketing, or other forms of direct services offered to an organization.
- Volunteering of time. People who volunteer their time outside of their professional services are another example of an in-kind donation.
For in-kind donations of services rendered, it’s best practice for nonprofits to provide a written agreement detailing the service provided as well as the estimated cost of services rendered. This allows professionals to potentially deduct the cost of their services provided from their taxes.
Examples of in-kind donations include:
- Help with taxes, legal advice, general business advice, marketing support, website design, and development.
- Software, furniture, office supplies and equipment, computers.
- Meeting space, mail services, printing services.
Are in-kind donations tax-deductible?
Most in-kind donations are tax-deductible, assuming you follow all the required guidelines. When a donor offers up an in-kind donation, they should seek out some form of a written acknowledgment of their donation from the charity or nonprofit. This can be a receipt for items donated or an agreement that services have been donated. Nonprofits giving out written agreements should include their EIN, name of their charity or organization, as well as the date received, and a description of the in-kind donation received.
This type of arrangement is common for nonprofit organizations that provide physical goods to their clients. Many of these organizations will offer donors a receipt for the items donated. Sometimes these receipts will include an estimated dollar amount for each donation, but this is not always a guarantee. For donors to deduct the cost of their in-kind donation from their taxes, they must have some form of a written agreement.
Personal services can be tricky, as they are usually not tax-deductible. Instead, professionals might be able to deduct the expenses that are associated with providing their services to a nonprofit. If the head of a marketing agency allows their employees to help a nonprofit organization with marketing services on company time, they might be able to deduct payroll and other associated expenses from their taxes, for example.
For this type of in-kind donation, it’s particularly important that both nonprofits and service providers obtain a written agreement along with detailed documentation or records of services rendered.
Ribbon enables charitable organizations to track all of their donations–even those that are in-kind. Organizations can track various forms of written agreements made to donors who donate goods or services as well as provide tax receipts using Ribbon’s platform.
Finding in-kind donations
Donations are the lifeblood of most nonprofit organizations, so finding new sources of donations is always a critical task. Finding in-kind donations can feel particularly challenging for most nonprofits, but it doesn’t have to be.
Strategically searching for in-kind donations can help a nonprofit save money, time, and effort. The best place for nonprofits to start searching is in their local communities. Organizations can make direct asks for physical donations on social media or through their email lists. They can host donation drives at their physical locations. They can also reach out to their members directly and ask them to donate their expertise!
Once local outreach has begun, nonprofits can start reaching out to larger organizations with direct asks for goods or services. Many larger corporations will offer some form of charitable giving.
