Donations serve as a lifeline for non-profit organizations. They use them to support the day-to-day operation of the charity, hold events and fundraisers, and help meet the needs of those relying on the organization.
However, cash donations aren’t the only way to support a non-profit. Charities need support in many different ways. One way you can fill a specific need in an organization is to make an in-kind donation.
What is an “In-Kind Donation?”
An in-kind donation is a non-cash gift given to a non-profit organization that can include goods, services, skills, time, or expertise. Both individuals and companies can make these types of donations.
In-kind donations can be anything from intellectual property to a pro bono logo from a local graphic designer. Whenever a person donates their skills or a physical object to your non-profit, it will fall into the in-kind donation category.
Examples of in-kind physical donations:
- Furniture donations (chairs, desks, tables, shelves)
- Equipment donations (computers, keyboards, printers, machinery)
- Food donation
- Clothing (new or gently used)
Examples of in-kind intangible donations:
- Trademarks
- Patents
- Advertising
- Royalties
Examples of service-based in-kind donations:
- Legal assistance
- Bookkeeping or accounting
- Electricians
- Doctors and nurses
- Graphic designers
What Happens When I Make an In-Kind Donation?
When you make an in-kind donation, you should receive both a letter and a receipt from the non-profit organization. This information will help you during tax season.
The in-kind letter should include the name of the non-profit, its federal employer identification number, the name of the donor (you), and any other details relevant to the donation. The monetary value of the expertise or skills donated should be calculated and included in this letter. Although something like expertise may be hard to value, it still needs to be acknowledged.
While the in-kind letter can act as a receipt for tax purposes, accurate transaction records are also helpful. If the acknowledgment letter doesn’t include pertinent information, you can request a receipt for your in-kind donation.
The in-kind donation receipt should include the following information:
- The name of the non-profit organization
- The donor’s name
- A detailed description of items and services donated
- Estimate or appraisal of the monetary value of the donation
- A declaration stating whether or not the organization provided goods or services in exchange for the donation.
When reporting your in-kind donation to the IRS, you’ll need to keep many rules and regulations in mind. It’s best to hire an accountant to handle the ins and outs of reporting to make sure you’re able to report it correctly.
To begin with, you need to ensure that the organization you’ve chosen is registered as a 501(c)(3) nonprofit. If they’re registered, it means that the organization is exempt from federal income tax and qualifies for a deduction. These organizations are legally required to make their status known, so it shouldn’t be too hard to identify them.
Why Make an In-Kind Donation?
In-kind donations are precious to non-profits because they help them access goods and services that would otherwise be out of their price range. These donations can help significantly reduce overhead costs that can quickly add up.
For large businesses, it’s much easier to donate goods than cash. If you’re self-employed, you may also find it much more convenient to donate your time and skills instead of donating money.
Donate Your Skills
One of the best ways to make an in-kind donation is through donating your skills. Here are a few ways you can help out your favorite non-profit with the following skill-sets.
- Accounting: Let’s say that you work as an accountant. You can contact a non-profit organization of your choice and ask them if they can use your services.
- Bookkeeping: With purchases constantly coming in and out of their organization, a reliable bookkeeper is a must for non-profits. If you excel in this area, you can help out a great cause while honing your bookkeeping skills.
- Graphic design: As mentioned earlier, those skilled in graphic design could lend their skill-set to creating an outstanding logo or decal for charities in their community.
- Video editing: Most non-profits love to have videos up on their website or social media displaying some of their latest events or daily operations. If you’re in the video editing industry, perhaps you could lend your expertise to creating a fantastic video trailer? An eye-catching video would draw in new volunteers and help others in the community become aware of a great cause.
- Transportation: Do you run a bus or taxi company? If so, offering rides to a non-profit organization will also fall under the umbrella of in-kind donation. You can contribute by transporting members of the non-profit on their next trip or provide transportation to younger members of the foundation who need help getting around.
- Offer cash equivalents: If you don’t necessarily have any skills you can offer as a self-employed person, consider offering a non-profit some cash equivalents. These items can include items such as stocks, bonds, or mutual funds.
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