5 Top Tips for In-Kind Gifts and Donation Tax Receipts
- Nonprofit Learning Lab
- Aug 4
- 5 min read
This is a guest blog.
In-kind donations are a goldmine for nonprofits. They allow supporters to give without reaching into their wallets and act as an alternative method of generating funding and revenue. Whether your charitable organization is looking for office furniture, supplies for your beneficiaries, or auction items, these gifts help you save money and stretch your budget.
However, accepting these gifts and issuing receipts for them is more complicated than with cash gifts. In this guide, we’ll share actionable tips to simplify in-kind gift management, ensure you create IRS-compliant donation receipts, and empower you to make the most of every non-cash gift you receive.
1. Understand What Qualifies as an In-Kind Donation
According to Chazin and Company, an in-kind donation is a “non-monetary donation, including goods and services, given to a nonprofit by individuals or for-profit organizations.” They can be given for free or at a discounted rate. Or, the donor might pay for the good or service on the nonprofit’s behalf.
Typically, in-kind donations fall into two categories:
Goods: Tangible goods might include office supplies, food, clothing, or equipment.
Services: Services can range from legal advice to graphic design provided by a volunteer professional.
Usually, when nonprofits need goods or services, they must purchase them using their hard-earned funding. With in-kind gifts, community members can directly donate the required goods or services, allowing the nonprofit to reduce expenses. This also allows nonprofits to diversify their revenue sources and attract more donors, as individuals who don’t want to make financial contributions may be open to making an in-kind gift.
Remember that not all in-kind donations are eligible for a tax receipt. For example, many nonprofits consider volunteer time an in-kind gift, as volunteers are donating their time and effort to a cause. However, volunteer time is not tax-deductible, making it ineligible for a tax receipt. Similarly, discounts on goods or services don’t meet the requirements; only full donations without an exchange of value qualify.
2. Create a Policy for Accepting In-Kind Donations
Making a cash gift is usually very straightforward. Generally, donors make a gift through an online donation page and then receive a receipt in their email.
With in-kind gifts, it’s not so simple. Since they can take many forms and are generally not accessible digitally, it’s important to create a thorough policy for in-kind contributions. This helps your team make informed decisions about what to accept and ensures consistency in how gifts are processed.
Your in-kind donation policy should include:
Accepted items list: Outline what types of goods and services your organization needs and can accept. Generally, your mission, storage capabilities, and existing needs will inform this list. For example, a food bank might welcome non-perishable food goods but decline gifts.
Condition standards: Define what constitutes an acceptable condition for donated goods. For example, will you only take new or like-new items, or will you also accept gently used or clearly used goods? Does the item need to be functional? Should it be free from strong odors?
Approval process: Designate a staff or volunteer team to review and accept gifts. These individuals should be trained to assess each gift’s usefulness and potential liabilities, such as safety concerns or maintenance costs.
Documentation protocol: Ensure all gifts are logged, acknowledged, and stored correctly. An inventory management system can come in handy here, making it easy for you to document in-kind donations and note their location or condition. You should also discuss where donors can drop off their donations or how they should convey their gifts of services.
Establishing an in-kind gift policy makes it easier for your supporters to donate. Publish this policy on your website so community members can find it whenever they’re inspired to make a non-financial donation.
3. Follow Best Practices for Issuing Donation Tax Receipts
Proper receipting is essential for donor trust and IRS compliance. According to ThriftCart, standard donation receipts must include:
Your organization’s name and EIN
Amount of cash contribution
Statement that your organization didn’t provide goods or services, if applicable
A description and estimate of the goods or services your organization provided in return, if applicable
Statement that any goods or services provided consisted entirely of intangible religious benefits, if applicable
For in-kind gifts, it’s not as easy to determine the monetary value the donor provided to your nonprofit. Luckily, you are not responsible for valuing most in-kind donations — donors must determine the fair market value (FMV) themselves.
Your in-kind donation receipt should describe the donated item, list the date it was received, and include a field for donors to write down the item's FMV. This allows donors to keep accurate documentation for tax purposes and shows your organization’s professionalism. You can also take some space on your tax receipt to thank the donor for their contribution.
4. Streamline Tracking and Receipting with Software
Keeping track of in-kind gifts manually can be a headache, especially for busy teams juggling multiple responsibilities. That’s where inventory management and donor management software come in.
A good inventory management system can log donated items as you receive them and generate donor receipts automatically. When integrated with your donor management software, you can store all related documentation in the donor’s profile. This helps you stay on top of donor relationships by tracking contributions over time. Some platforms also allow nonprofits to run reports on in-kind giving, which helps with audits and impact reporting.
If your nonprofit also operates a merchandise or thrift store, consider purchasing a point of sale (POS) solution specifically for your needs. For instance, thrift store POS systems also offer inventory management systems that sync with e-commerce platforms, ensuring you always have an updated understanding of what’s in stock and never oversell items.
5. Steward In-Kind Donors Strategically
Just because a gift isn’t financial doesn’t mean it’s less important. In-kind donors have the capacity to give generously and repeatedly, and may even become financial donors as well, especially when they feel appreciated.
In addition to tax receipts, consider other ways to recognize and steward these donors. For example, you can add their names to your donor wall, thank them publicly in newsletters, or feature their contributions on social media. If a business donates goods or services, co-branding or a shout-out in event materials can go a long way.
Make each appreciation message personal to maximize relationship-building. For instance, if a group of supporters donates tech equipment that can power a new digital literacy program, share stories or outcomes that show the tangible impact of their gift. Send them a personalized email thanking them for their contribution and emphasizing the value their gift has on your mission. Down the line, you can follow up on their contribution and let them know how it’s affected your nonprofit positively. This strengthens your relationship with that donor and can inspire future contributions.
In-kind gifts can make a huge impact on your nonprofit’s mission if you manage them wisely. They provide diversified funding and allow donors to support your community through creative, non-financial gifts.
With these tips, you can make handling in-kind donations easier, save staff time, and ensure donor trust. If you already accept in-kind gifts, review your current processes and look for opportunities to standardize and automate your operations. That way, you’re ready for the next valuable gift that comes through the door.