In-kind donations are a powerful, yet often overlooked, way for nonprofits to boost their impact while reducing costs. Learn how to effectively secure and leverage these valuable gifts to enhance your fundraising events and strengthen donor relationships!
When most people (or organizations) think of donations, they likely picture cash contributions, but in-kind donations can be just as impactful for your nonprofit.
These non-monetary gifts, which can include goods, services, and even volunteer time, empower your team to cut costs and maximize the funds you raise.
In fact, studies indicate that U.S. donors (including individuals, businesses, and government agencies) contribute an estimated $58 billion in-kind to nonprofits each year.
Whether it’s donated event space, marketing expertise, or supplies for fundraising, in-kind gifts can play a key role in achieving your goals.
Let’s get started with the basics.
In-kind donations s are services or goods/products that are offered to your organization free of charge instead of cash donations. They can be physical, tangible items, or intangible items such as time or skills.
Your organization almost definitely benefits from this through your volunteers — even if you don’t currently think of their time and resources as an in-kind donation.
These donations may come through companies or individuals.
A few examples of in-kind donations can include:
In-kind donations are a valuable resource for nonprofits, providing everything from essential goods and services to skilled volunteer time, all without a financial cost.
If you understand what qualifies as an in-kind donation, you can better identify opportunities to leverage these gifts and maximize your nonprofit’s impact.
Securing these types of charitable gifts can have numerous benefits for your organization. Advantages of in-kind donations include (but are certainly not limited to):
These contributions not only reduce costs but also create meaningful opportunities for collaboration and engagement.
For example, a local catering company might donate food for a nonprofit fundraising event, allowing your organization to reduce its expenses and allocate more funds towards your cause.
Since it doesn’t require donors to give money, in-kind donations can sometimes be easier to secure. People will often be happy to donate their time, services, or products for free – often more so than giving cash to nonprofit fundraising campaigns.
Here’s how to get started:
Think about the type of products or services that your organization needs and what you can offer to in-kind donors in exchange for their contribution. This is particularly important if your organization is approaching potential sponsors for in-kind sponsorship or partnerships.
In-kind donations can be mutually beneficial! Whether it’s public recognition, promotion on social media, or the feel-good factor or supporting a cause, make sure you’re clear on the value your organization can offer in return.
Once your value proposition is nailed down, start building a list of people who may be more likely to give in-kind to your organization.
Let your network know that you’re looking for in-kind donations. Your supporters may know people who can help with donations — but only if they’re aware of your needs in the first place.
You can promote your desire for in-kind donations in the same way as cash donations by sharing this information on your organization’s website, social media channels, and in donor communications. If the community is aware of what your organization needs, you’re much more likely to receive the right type of in-kind donations.
Securing in-kind donations is much easier when you use the right tools to streamline the process.
Platforms like Double the Donation provide nonprofits like yours with access to comprehensive databases, which can help you quickly find businesses, sponsors, and in-kind donation opportunities. With a simple search, you can identify companies that support your nonprofit’s mission and discover which of them are most likely to provide in-kind support.
Before you accept an item, make sure you’re very aware of its history and any potential health and safety concerns. This is especially vital if they’re not brand new (such as used clothing donations), and they’ll be passed on to the beneficiaries of your cause.
One of the most important steps in securing future in-kind donations is showing genuine appreciation for the contributions you receive. A simple thank-you can go a long way in fostering strong donor relationships.
After receiving an in-kind gift, make sure to formally thank the donor for their generosity. This not only shows appreciation but also reinforces the importance of their support to your cause.
Pro tip: A handwritten thank-you note can be a personal touch that makes your appreciation even more meaningful. Including specific details about how their donation will directly help your mission can further demonstrate the impact of their support, encouraging them to continue contributing in the future.
In-kind contributions to nonprofits are tax-deductible like cash gifts. Issue in-kind donors with donation receipts for their tax deductions, as you would for any other donation. This makes it a lot easier at tax time.
Do remember to note the fair market value of the in-kind gifts so that you can mention that in the receipt to help donors with tax deductions.
Assess the impact of in-kind donations and the effect they have on your mission and work. Sometimes, donations will have a direct effect on your work, but it will often be a case of highlighting how it frees up extra funds, where these are spent, and the overall impact on your work.
If in-kind donors are happy for you to promote their generosity, you can share the impact of their contribution in your communications, which can often inspire further in-kind contributions. Be sure to highlight generous in-kind donations on social media, in your newsletter, and/or on your nonprofit website!
Creating a clear in-kind gift acceptance policy is crucial for ensuring that your nonprofit accepts donations that align with your mission and operational needs.
A well-documented policy helps set expectations for both your organization and your donors, making the donation process smoother and more transparent.
Pro tip: To ensure the policy is as comprehensive as possible, collaborate with your board to establish clear guidelines. By implementing a well-defined in-kind gift acceptance policy, you can avoid confusion, ensure that donations are used effectively, and build stronger relationships with donors.
Reporting in-kind donations correctly is crucial for your nonprofit to stay compliant with tax and accounting regulations. When you receive an in-kind gift, you’ll need to determine its “fair value” based on its estimated market worth.
The first step in doing so is to check whether your nonprofit’s accounting follows Generally Accepted Accounting Principles (GAAP).If you do, you’ll need to record in-kind donations as income as soon as they’re received.
GAAP guidelines, specifically SFAS No. 116, dictate that all contributions, including in-kind donations, should be documented as revenue. For example, donated services that require specialized skills (like those provided by accountants, architects, or healthcare professionals) must be recognized in your financial statements.
Pro tip: If you’re unsure about whether to report a specific in-kind donation, it’s a good idea to consult a qualified tax advisor. They can help clarify the reporting requirements and ensure that your organization is following the proper procedures.
Properly documenting and categorizing your in-kind donations is essential for accurate reporting and smoother tax filing. Here’s what you need to include when recording in-kind donations:
You can also break down donations into different categories to make tracking easier and save time when filing. Common categories include:
By organizing donations into these categories, you’ll not only gain a better understanding of their value but also streamline the process of completing your IRS Form 990, ensuring you don’t miss any important information.
Plus, if your nonprofit uses a platform like Donorbox, it’s easy to record in-kind donations alongside cash contributions, simplifying the tracking process and ensuring that everything is documented in one place.
In-kind donations can be a great way to build stronger donor relationships – especially with those who may not be in a position to support your organization with a cash gift. They’re also an effective way to reduce your organization’s costs so you can make your budget go further.
If you’re ready to make the most of in-kind donations for your cause, Donorbox can help streamline the process. Our intuitive features make it easy to track both cash and in-kind gifts, helping you stay organized and focused on your mission.
For more tips on enhancing your nonprofit’s fundraising strategy, be sure to explore our other resources on the Nonprofit Blog!
Adam is the President of Double the Donation, the leading provider of tools for nonprofits to raise more money from corporate matching gifts and volunteer grant programs.
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Adam Weinger