In-Kind Gifts:
How to Acknowledge and Recognize Them

When you receive gifts of products, time and services, be aware that your organization can be held in even greater regard by donors of such In-Kind gifts, should you express your gratitude in a meaningful way—in a manner far and above how these contributions are usually acknowledged by non-profit organizations. This can be accomplished in strict keeping with the applicable IRS rules and regulations, which are especially explicit when it comes to In-Kind gifts and how non-profits handle them.

By law, non-profit organizations cannot provide a donor with the dollar value of an In-kind gift. Such valuations when applicable, relative to “fair market value” of In-Kind gifts, need to be professionally assessed and certified elsewhere—if they can be—and that is the responsibility of the donor. This certification subsequently needs to be resolved with the professionals and others who prepare the donor’s tax forms—whose work in turn will need to be reconciled with IRS regulations. In instances where time and service are donated, no tax break whatsoever is allowed, as the IRS Publication 526 clearly states, “You cannot deduct the value of your time or services…”

This unique aspect of In-Kind gifts often causes a non-profit organization to acknowledge them in understated, and almost offhanded ways, unlike the precisely stated amounts cited for gifts of cash and stocks. As well, the dollar value of gifts of cash and stocks can be directly related to specific programs and services made possible by such support, which is not usually the case with In-Kind gifts. Thus, appreciation of In-Kind gifts is not always expressed as effectively and graphically, but it can and should be.

A non-profit organization can acknowledge In-Kind gifts with descriptions of their practical value to the organization, and make some reference to their worth in dollars—what they might have had to pay “retail.” Most non-profit organizations could treat their In-Kind gifts in somewhat the following way:

Sample Acknowledgment for an In-Kind Gift

“Thank you for your generous gift of ________(Full Description)________ which we received on ____(Date)____. Your generous contribution will help to further the important work of our organization.

(Note: The benefit to the organization of the In-Kind contribution may be expressed in exact terms of its direct application to the organization’s operation, or it may be more appropriate that an indirect reference be made when the In-Kind gift’s application is not as sharply defined.)

While, according to IRS regulations, you will not be allowed to declare the value of your donation from our acknowledgment, we can say that, but for your generosity, we likely would have had to expend approximately $________ for what you gave as an In-Kind contribution. These are dollars saved which we are able to apply directly to support the programs and services we provide for the well-being of those whom we serve in our community.”

Recognition: Same as Cash

In addition, appreciation of in-kind contributions can always be publicly recognized by non-profits in their annual reports and other publications, with the donors’ names listed under the respective gift category amount related to the “retail value” of products, time or services donated. As stated previously, those figures would not be IRS-deductible amounts, and are not certified as such. But the public gestures by non-profit organizations regarding the “market worth” of In-Kind gifts are always greatly appreciated by the donors.

There can be little doubt that your In-Kind donors would be quite pleased to see their names listed in a contribution category of that “retail cost” right up there with the givers of cash. This public listing has been practiced for many years, with those contributing cash finding no fault when In-Kind donors are placed in the same category with them. And more importantly, donors of In-Kind gifts frequently express their gratitude for being recognized in such an appropriate and thoughtful manner.

Don’t Be Unkind to In-Kind

To reinforce the idea that it is a well-served practice to recognize In-Kind gifts in the way suggested, and that by not doing so could disappoint or alienate the donors of such gifts, I am reminded of two incidents.

Recognize What it Would Have Cost You “Retail”

Recognition of an In-Kind gift became a serious issue with a non-profit client of mine following the conclusion of a successful capital campaign. The new building was up and operating. Everyone—board, staff and the community—was satisfied and happy. The trouble came as the listing was being finalized for permanent and public recognition of the capital campaign donors on a bronze recognition plaque for the lobby, in preparation for the new building’s dedication event. Names were placed in columns under the specific and respective contribution levels. Those of us who were involved in various leadership roles for the campaign together reviewed, edited, and then approved the final rendering of the listing before it was to go to the plaque manufacturer. Then, two of the organization’s leading board members abruptly demanded the removal of the name of a major In-Kind donor from the $15,000 to $19,999 category, and demanded that the donor’s name be repositioned in the $1,000 to $4,999 category.

The In-Kind donor was a paint manufacturer. The original campaign expense budget for the paint (prepared well before its donation) reflected a best price to be paid in the market in the amount of $15,000 for the gallons required to paint all of the rooms in the new, several story building. The two shortsighted trustees adamantly insisted that, from experience with their own businesses’ manufacturing costs, the true expense to the paint company would only be approximately one-third of the retail price, and that was the gift category in which the paint contribution should be recognized. I went tooth and nail on this, and I finally won over the two truculent board members when they realized that, had not the paint been donated (no matter the cost to the paint manufacturer), the non-profit would have had to raise additional cash in the amount of $15,000 to pay for the paint.

Sometimes, being stubbornly practical and literal can do damage to the relations a non-profit has with generous benefactors. Imagine the officials of the paint company attending the dedication event of the building they supported, only to see their company’s name placed in a category not in keeping with the worth of the paint as they knew it—but greatly diminished in value as seen by the officials of the non-profit organization.

In-Kind vs. “Real Money”

I was going into the last month of a fund-raising consulting contract for a capital campaign with a social service organization. All had gone extremely well over our ten-month partnership. The organization’s volunteer leadership and staff did an outstanding job, the money was raised for the new building, and I felt that the last month of my contract required greatly reduced counsel on my part. Even if no counsel was necessary, the contract required that I be paid. In any event, I told them not to pay me for the last month. As I saw it, I “donated” $3,000 to the organization. Naturally, I did not attempt to declare that “value” for a tax deduction. But, when the celebrations were over and the new building was dedicated, I, with some anticipation, looked for my name to be listed in the campaign publication under the “$1,000 to $5,000” category, or included with their listing of In-Kind gifts. My In-Kind contribution was not acknowledged in any way. I asked the Director of Development about what I thought to be an oversight. The answer was quick and curt, “We appreciate what you did, but it was not “real’ money.” I saved them $3,000 from their capital expense budget, and the money was not “real?”

Valuation: It May Not Seem Fair, But It’s the Law

As the two foregoing examples show, the value of In-Kind gifts for which organizations should thank donors is not necessarily the same as the value that the IRS will allow for tax purposes—or that the donors perceive themselves as having given.

When it comes to putting a value on In-Kind gifts for the purpose of donors taking tax deductions the rules can seem to donors to be unfair. Basically donors of In-Kind gifts cannot take a deduction for the time that they donated as a part of that In-Kind gift. Only the actual out-of-pocket expenses for which donor have receipts can be treated as a tax-deductible charitable gifts.

For example, let’s say there is a furniture maker who determines what to charge customers for a table by multiplying the number of hours he works on the table by an hourly rate at which he values his time and expertise and then adding that amount to the cost of materials. In this example let’s say it takes him 10 hours to make a table and that he values his time at $50 an hour. And let’s say that the materials he used to make the table cost $100. He may see the value of that table totaling $600, and might try to get that price if he were to sell it. But instead of selling it he gives it to a nonprofit.

The question the furniture maker/donor and the nonprofit have before them is: What is the amount that the furniture maker/donor can take as a tax deduction for his/her gift of the table? The answer according to the IRS is simple: $100—only the out-of-pocket cost that the furniture maker/donor incurs. It doesn’t matter that he believes he could sell the table for $600. The furniture maker/donor’s time and skill–the value he adds to the cost of materials is not tax deductible.

Why does the IRS neither accept nor itself place a value on the donation of the furniture maker’s own time and expertise? Because there is no universal formula that can be applied to our furniture maker’s time and expertise to determine its fair market value (FMV). There are too many variables involved. The IRS could not relate to one craftsman’s tax break claim of a $50 per hour rate to another’s of $150 per hour. To complicate matters even more, imagine the differences when it comes to the total time taken to make the furniture. The per-hour charge, and time taken to make the product, are variables which cannot be reconciled by the IRS.

It may not seem fair, but it’s the law. Arguments could be made for a different tax valuation structure, but those arguments would need to be made to Congress not the IRS. The latter only administers the laws that the former makes.

Never Take In-Kind Gifts for Granted

The final message here is that you must regard all types of “In-Kind” gifts with the care and consideration they deserve. It’s so easy, and so appropriate to acknowledge “real” cash and securities properly. But all too often when it comes to In-Kind gifts, it’s another kettle of fish. It should not be.

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  1. Very informative article and timely for me. I just designed a new logo for a non-profit as a favor to a friend. I am an artist/designer by profession, and had I been hired to do this I would have charged between $500 and $1500, depending on time and number of comps required. Although what I offer is usually considered a service, the end result is a tangible image that will be used in a number of ways for communication, public outreach, advertising, etc. So, is it tax deductible or not?

    • Phyllis,
      Generous of you to donate your creative/artistic services.

      Unfortunately, the IRS rules you cannot claim a tax deduction for donated professional services. Out-of-pocket expenses, perhaps and case by base.

      Artistic/creative services used in the ways you describe for your good effort, could as well apply to fund-raising brochures, annual reports, donor recognition displays, etc.

      I truly understand how you feel regarding how your work, being tangible, may help with mission furthering, fund-raising, etc. But, such an exemption, hard enough to measure, would be unfair to the other donors of professional services, such as painters, electricians, carpenters, and others whose professional services are donated In-Kind.

      As I read and understand the IRS Publication 526, the section, “Contributions you cannot deduct,” there are no exceptions.

  2. Tony, great article! What about for services like food prep by a chef

    • Marcelle,
      Thank you.

      The chef’s food prep time and expertise are not what the chef can declare for a tax break.

      In the IRS Publication 526, it is made clear that no deductions are allowed for donated professional services.

  3. it is my understanding that if someone discounts the rent to a nonprofit that is renting the premises, that in-kind gift is not a deductible donation for tax purposes because it is a contribution of less than an entire interest in that property. Because you still own the building, you have contributed a partial interest in the property and cannot take a deduction for the contribution.

    • Michael,
      Your understanding seems to be the case with the IRS, but from some reading of related information, there may be options in favor of the owner of the property discounting some rent to favor a non-profit. See the following article:

      As well, enter the key words regarding such a deal into a Google or Bing, or other search. There are a number of other explanations to be considered, such as the one I provided.

      Being a source of non-profit fund-raising information, we are often reluctant to delve too deeply into what are complex legal matters, thus your need for an accountant of attorney skilled in non-profit law.

  4. I was contracted to do work for a non-profit. I had a written contract that was amended verbally (increasing my hours). I was asked to work such event, and my supervisor was to develop a way for me to tally my hours (she never did so I jotted them down on-paper waiting for her to develop a form). In the end I worked a total of 205.50 hours of which they had budgeted only 165 so 40.5 wasn’t. What is their legal obligation to pay me, or can they write me a letter for a donation of those hours?

    • Sorry to say, no legally binding agreement, means no contractual responsibility to pay you.

      It’s your word against hers.

      However, if she admits to the agreement made to you, she needs a good reason why she is reneging.

      If she confirms what you understood, would she do so in the company of someone of authority in the non-profit so her reasoning could be aired?

      If others at the non-profit personally heard of the promise and would confirm your verbal agreement, then you could make an appeal to the board president or other top officials.

      Unfortunately, the IRS will not allow you to declare any value for a tax-deduction based on services rendered—only for applicable out-of-pocket expenses.

      Such a letter would do you no good at all.

  5. Our finance department is requesting the inclusion of explicit language stating the gift-in-kind is not eligible for a tax deduction. Is this required? Is it prudent to be this explicit? If so, are there examples available?

    • Anthony,
      If your finance department is telling you to tell your In-Kind donors that their gifts-in-kind are not tax-deductible, you would be giving false and misleading information.

      Tax deductions for GIK are up to the donors to seek, or not, via the counsel they receive from those who help prepare their annual tax reports.

      My article above relates to only how we publicly recognize such gifts, and in no way do we explicitly give values, and certainly we do not tell such donors that they cannot seek a tax deduction.

  6. So how do you record GIK in your donor database? We have a company who donated $6,000 worth of printing for a fundraiser. We acknowledged this generosity very similarly to what you posted in the article above but have had discussions on whether it is appropriate to list $6,000 in-kind in the donor’s gift record OR should we list the value as $0.01 in Raiser’s Edge and identified the $6,000 printing in the reference field.

    • Laura Jo,
      The article was written to fill what I knew to be a gap regarding how most non-profits acknowledged In-Kind donations. Thus, what I wrote is donor-centered, that is, to appropriately recognize such gifts for what they might have cost “retail.”

      Apparently, that is what you nicely did. And yes, I think you should post that In-Kind value as a “real” donation in your database for that particular donor.

      How the receiving non-profits account for such donations in their financials, is something to which I do not know the answer. Your head of finance and your outside auditor are the ones to consult to ensure that your logging in of In-Kind donations are according to accounting standards.

      However, were you to spend the $6,000 in the first place for printing, and that expense was a line item in your budget, then it seems a rather simple exercise to, in turn, post the value of the In-Kind donation of printing so as to offset the expense.

    • I’ve had a bad experience with gifts of $.01 (or similar) for various reasons – calculating gift averages, LYBUNT SYBUNT work etc. I’m in favor of entering the value of the GIK.

      If you enter a gift type or subtype of “GIK” in your database, you should easily be able to include or exclude the information as needed in various reports.

  7. Our church is non-profit. It is a small church and doesn’t have a lot of cash on hand. As a result, many of the congregants pay for items that the church would otherwise pay, such as gas and repairs for the church can, food for feeding the youth each week, and repairs to the church. Instead of receiving reimbursement for these items, can the amount spent be counted toward tithes as long as receipts are provided to show what was spent?

    • Robyn,
      If many members of the congregation pay for items which would otherwise require the Church to pay why is there mention of possible reimbursement? That exchange is of no benefit to the Church’s required expenses.

      To my way of thinking, it would be far easier, and of direct benefit to the donors, if they made donations in amounts individually related to specific expenses as they came up.

      For example, if a plumber will charge $256.30 to fix a water leak problem, then a Church member makes out a check in that amount, payable to the Church as a bona-fide contribution. The Church, in turn, cashes the check and pays the plumber. The Church member has given a tax-deductible donation.

      Having a member of the congregation directly pay the plumber, has that Church member end up simply with a paid invoice which will do no good for tax-deduction purpose when they file with the IRS. All you can do is to public recognize the worth of the expense, much as I suggest in my article above.

      I think the best, and perhaps only, In-Kind donations you should solicit and accept directly are products and services which are provided by vendors and other businesses; what they themselves sell, provide or manufacture.

      But I see a possible problem regarding the blessing (so to speak) of many members of the congregation paying for expenses, no matter how they do it.

      It’s possible that many of those donors could see their tithing/donating support as being fulfilled when they pay for a needed service. It’s possible you could have an expense of say, $200 paid for, but to have that sum considered by the donor as his or her partial or total offering support, which is otherwise made weekly.

      I would be concerned that in the long term there may actually be an overall lessening of donations if project and service donors are distracted and directed away from making their regular cash offering.

      The Church must make it abundantly (with gratitude) clear of the need to have such direct expense donations be in addition to what the respective member of the congregation would give to the Church.

      Sounds like a “happy problem,” to have so many step up and help with those on-going and emergency needs, but please do review the process for the issues I have raised.

      The last thing you want to hear from a Church member who has additional and meaningful cash-giving ability, is for him or her to say with finality, “But I already paid for this month’s gas bill.”

  8. If a grocery store donates a $100 gift card so that we can purchase refreshments for a group our NFP is hosting, is that considered an “in kind” gift? Can the thank you letter state the value?

    • Jyl,
      Use the suggested acknowledgment from my article.

      That way, you can accurately state that the $100 gift card “saved you from spending that amount.” You are giving public recognition of the value of the card, but not giving any official-sounding donation amount.

      Just avoid what may look like the receipt of $100 in any form for IRS recognition.

      The grocery store knows how to account for such donations, be they as business expense, or for tax-deduction purposes.

      They know that the $100 retail purchase the card commands is higher than their actual cost of the products purchased in hat way.

      That’s another good reason to simply state how grateful you are for not needing to spend $100 for what you required for the refreshments, thanks to the store’s generosity.

  9. I have been tasked with providing in-kind forms to individuals who have donated items to be used as door prizes for an upcoming banquet. I thought in-kind forms were for services rendered only and not item or cash donations. What is correct?

    • Cathy,
      It’s the other way around.

      Services rendered are not allowed for tax-deduction purposes.

      Therefore, there is no point in having a form for such donated services.

      Using the advice given in my article, in such instances you can give the donors of services a thank-you which, if they give its value to you, has you “understand” that they donated $ ___________ for services which they would otherwise require payment in the marketplace. Or even, if applicable, that their donation of services in the amount of $ ___________ allowed you to not spend that money so you have more funds to carryout your mission.

      When you receive cash, a simple acknowledgment citing amount, date and donor, are all you need.

      But, when it comes to the donations of products, such forms provided by the receiving charity are commonplace.

      Forms of that type are readily available from most non-profits. When we donate clothing and other items to such organizations as the Salvation Army, we are always given a form for the items donated to be possibly processed for a tax deduction.

      You can see many such examples from which you can adapt by simply using a search engine asking for — In-Kind donation tax declaration forms — or some such similar language. You can also get hard copies from local charities such as the SA, Heart Association, Good Will Industries, etc.

      Here is a link to one such form, and you will note that there is explicit instruction to the In-Kind donor that he or she themselves must provide to the IRS the value of the items they donated

  10. I work for a non-profit hospital that has agreed to be the presenting sponsor for a volunteer recognition dinner event for a non-profit organization in our community. Their org has asked me to give them an in-kind estimate for their records. The event will be held in our main auditorium, our food services staff will set up the room for 200 guests,complete with table coverings, disposable plates and flatware. We will provide a buffet dinner for 200 guests. I will also create the program and our Forms department will print 200 color copies. Am I correct in assuming that I may consider the fee that we would charge other orgs to rent our auditorium, as well as the cost of the dinner, and the print cost (ink/paper) of the program in my inkind estimate? And, that any labor involved by any staff, i.e., my work to create the program, the kitchen staff setting up the dining area and both the kitchen staff and housekeeping staff cleaning up at the end of the event, is not to be included?

    • Elizabeth,
      Coming from your non-profit hospital, as the In-Kind donor, the receiving non-profit should be given a total In-Kind value of all the tangible items you provide in an amount you can determine for their collective “Fair Market Value.”

      The primary reason the benefiting non-profit wants that In-Kind donation amount is so they can give your hospital appropriate and deserving public credit.

      How they handle the value on their own books is to be according to standard accounting regulations and guidelines, their own finance department, and their outside auditor. You have no place in that process, other than give a defensible accounting of FMV for what you gave them.

      Since what you are giving them has no IRS regulation implications directly applicable to them, their only duty is to, on the other hand, apprise any paying guests of the value of gifts and services they receive—which must be deducted from any patron fee they contributed,

      Since the event is a volunteer appreciation event, there may not any such payments/donations of admission/attendance money. If any do pay, and the rule above would apply, it does so even if what the patrons receive is donated by your hospital. Fair Market Value prevails, nonetheless.

      As far as labor costs are conquered which you will incur, if such work is conducted during normal working hours and is done on occasion, it is your choice to add labor cost estimates or not to the In-Kind total you will give to the charity.

      However, such charges for professional services are not allowed for tax declaration by individuals, and though yours is a non-profit and your gift is not applicable in that way, it could still be a good idea to not add up those program creation, staff setting up, and staff cleaning up charges you might be able to calculate. That is, unless such donated events are common enough that those services are billed in the case of paying organizations.


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