Everything You Need to Know About In-Kind Donations

Schools, foundations, and nonprofits are continually seeking donations to help them achieve their objectives. An in-kind donation is one type of contribution that can provide significant benefits to nonprofit organizations.

In-kind donations are gifts of goods or services, offering more flexibility and adaptability than monetary donations. While financial contributions are valuable, in-kind donations provide your nonprofit with goods and services that serve your immediate needs. They provide cost savings, expand services, foster community engagement, and offer flexibility in meeting your organization’s operational requirements.

When individuals, businesses, or other organizations contribute in-kind donations, they become active participants in your mission. This engagement can lead to long-term collaborations, volunteer opportunities, and increased awareness of the work your organization is pioneering.

What is an In-Kind Donation?

An in-kind donation is a non-cash gift made to a nonprofit organization. These contributions can be made in the form of time, services, expertise, and goods, often coming from both large businesses and individuals.

Because in-kind donations don’t come in the form of physical cash, they can be confusing when it comes to recordkeeping. These donations are recorded on your financial statements as monetary values, determined by the fair market price you’d otherwise pay for the goods or services you received. 

While in-kind contributions are an essential source of nonprofit revenue, you must ensure that the in-kind donations you’re receiving are relevant to your organization’s mission.

Examples of In-Kind Donations

What qualifies as an in-kind donation? There are various types of in-kind donations, some of which may be more useful for your nonprofit than others. Here’s a closer look at several in-kind donation examples:

Goods donations

A goods donation involves a tangible item that the donor gives to the organization free of charge. You can use these items in your day-to-day operations or at an event.

A donor may contribute an in-kind donation in the form of goods, which can include:

• Computers
• Food
• Clothes
• Office equipment
• Building materials
• Food
• Alcohol and beer
• Cars
• Venue
• Supplies

Goods donations provide vital resources to your organization, ensuring you have access to much-needed items for continued operation. They help alleviate the financial burden from your nonprofit, allowing you to focus on your more critical needs.

Donated goods also promote sustainability by reducing waste and encouraging the reuse of items that might otherwise end up in landfills. They help foster a sense of empathy and community, as donors directly contribute to improving the lives of others, creating a positive impact, and promoting social cohesion.

Expertise donations

An expertise donation refers to when a professional lends advice to an organization for free. This advice could include tax advice, event planning, or any other form of expertise. Most often, corporations will offer in-kind expertise donations by allowing nonprofits to access their services at no or reduced cost. In some instances, the donor may also be able to write off that discount. 

These donations offer a valuable resource that may not be easily accessible or affordable for your organization. Expertise in areas such as marketing, technology, or legal advice can significantly enhance your operations and effectiveness. In-kind expertise donations facilitate knowledge sharing and collaboration among professionals, promoting innovation and effective problem-solving.

Service donations

Service donations refer to donations made by contributing time through volunteer work. A nonprofit may accept professional service donations for fundraisers and drives, where they ask professionals to complete tasks such as printing brochures, setting up events, and providing licensed bartending services, among others. 

These donations provide essential support to nonprofits, allowing your organization to deliver programs and services more effectively. They take the weight off of your nonprofit’s resources, enabling you to spread your budget more effectively.

Service donations also foster relationships between your nonprofit and your local community by creating a sense of engagement through human interaction.

Pros and Cons of In-Kind Donations

There are varying pros and cons to in-kind donations. Let’s weigh the advantages and disadvantages:

Pros of in-kind donations

Accepting in-kind donations enables you to:

• Allow for growth: Receiving in-kind donations can take your organization to the next level. Whether it’s supplies, computers, or a car that helps you get closer to achieving your goals, in-kind donations often have immediate applications that money can’t provide.
• Create connections: In-kind contributions enable you to build relationships with your donors, which can lead to future monetary giving, a corporate walk team, or other opportunities.
• Make a bigger impact: Often, in-kind donations can make a greater difference for smaller nonprofits. Compared to receiving a $5,000 donation, a free company car may help a newer organization achieve its goals more quickly.
• Reduce operating costs: An in-kind donation can provide access to the resources you need at a lower price. For instance, receiving tax services for free from an accounting firm in the form of an in-kind donation.

Cons of in-kind donations

In-kind donations pose some considerations, as they:

• Can lack relevancy: There are times when you may receive an in-kind donation that doesn’t align with your goals. An example would be having someone offer to create a website for you for free, even though you already have an in-house website designer working on it.
• May require storage capacity: When it comes to goods, you’ll need to have the space to store them. If you’re a new nonprofit with limited office space, receiving large amounts of clothing or food could force you to pay for storage options you can’t afford.

Tips for Accepting In-Kind Donations

It’s imperative to have procedures in place for in-kind donations. As a result, your organization can quickly filter out irrelevant in-kind donations and accept ones that will make the most sense for your mission. Here are a few ways to ensure the in-kind donations you receive are legitimate and in your best interests:

• Donation lists: By publishing lists of in-kind donations your nonprofit needs, you can ensure that donors only contribute items or services that align with your organization’s intentions.
• Agreements: A written agreement is essential when you start receiving considerable donations. This agreement can cover the donation’s value, the “contract” between your organization and the donor, the purpose and nature of the gift, and more to ensure both parties are on the same page and expectations are met. 
• A gift acknowledgment form: Show your donors that you appreciate their donations and explain the value they’ve brought to your nonprofit. This way, you can encourage them to make future donations.  They will also need an acknowledgment for their own bookkeeping, and you will need to record it for your annual report and audit.

In-Kind Donation Frequently Asked Questions (FAQs)

Because accepting in-kind donations can be tricky, these FAQs can help ensure you fully understand them:

How do nonprofits “ask” for in-kind donations?

There are several ways to request in-kind donations. Begin by adding a section to your fundraising website that outlines the types of in-kind donations you accept. If you send out a newsletter, you can also include relevant information there. For nonprofits that already have strong relationships with donors, it can be as simple as asking a donor to consider providing an in-kind contribution in lieu of their typical cash donation.

Can donors write off in-kind donations?

Generally, donors can deduct in-kind donations, as they’re considered charitable donations, just like cash contributions.

What is the correct way to acknowledge an in-kind donation?

Recognizing an in-kind donation shows donors that you’ve received the gift, allowing them to claim the donation on their taxes. This can be done by sending them a donation receipt or email to confirm the transaction.

How do I work out the value of an in-kind donation?

Calculate the value of an in-kind donation by comparing the fair market sale price of similar items online or asking the donor to provide that information.

Do I record in-kind donations as revenue?

Yes, you must record the fair market value (FMV) of the donation as revenue for your own audit and annual report.y. Contact us for more information!

Learn More

Now that you understand the value of in-kind donations to donor-driven organizations, you can start raising more money with less stress. We support nonprofit organizations by providing technology tailored to your organization’s needs, offering ongoing support, constant innovation, valuable insights, and more. Read more about additional nonprofit revenue sources here!

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