In-Kind Gift Process

What Can Be an In-Kind Gift?

In-kind gifts can take many forms, including:

• • Tangible Goods: This is the most common type. Examples include books, art, real estate, equipment, vehicles, clothing, or even a collection of valuable items.
• • Services: A professional can donate their expertise, such as a lawyer providing legal services, a graphic designer creating a logo, or a carpenter building a new structure free of charge.
• • Intellectual Property: These are intangible assets, which include copyrights, patents, and trademarks.

Why Should a Donor Consider an In-Kind Gift?

• • Direct Impact: Donating goods or services that the organization directly needs can be more impactful than a cash donation of the same value. For example, a food bank might get more out of a large donation of food items than it would from a cash donation of the same amount.
• • Tax Benefits: Donors can often deduct the fair market value of their in-kind gift from their taxes, subject to certain IRS rules and limitations.
• • Donation of Assets: Donating fixed and financial assets via an in-kind gift can create lasting benefits for a good cause, while avoiding capital gains taxes and allowing donors to deduct the full fair market value of the asset.
• • Leveraging Expertise: Professionals can use their skills and talents to support a cause they care about, which may be more satisfying than a simple cash donation.

Important Considerations for Donors

• • Non-Profit Needs: Before donating, donors should always confirm that the non-profit can use and accept the gift. Organizations have limited resources and may not be able to store, manage, or utilize every type of donation. A quick call to the organization can prevent a well-intentioned but unusable donation.
• • Valuation: This is a critical step for tax purposes. Donors are responsible for determining the fair market value of their donation. For items under a certain value (currently under $5,000 in the U.S.), a donor's estimate may suffice. For items valued at $5,000 or more, the IRS typically requires a qualified appraisal.
• • Documentation: To claim a deduction, donors must get a written acknowledgment from the non-profit organization. This acknowledgment should describe the gift but should not state its value. The organization can only provide a general description of the item received.
• • Tax Rules: The tax rules for in-kind gifts can be complex. The deductibility and valuation of the gift can depend on various factors, including the organization's use of the gift, how long the donor has owned the item, and the donor's income level. Donors should consult with a qualified tax professional or financial advisor.

General Process for Donating an In-Kind Gift

• • Contact the Organization: Reach out to the non-profit to discuss your potential donation and confirm they can use it.
• • Determine the Value: Assess the fair market value of your item or service. If it is high-value, obtain a qualified appraisal.
• • Transfer the Gift: Arrange for the transfer or delivery of the goods or provision of the services.
• • Obtain Documentation: Get a written acknowledgment from the non-profit organization.
• • Consult a Professional: Work with your tax advisor to understand how to claim the deduction correctly on your tax return.

Disclaimer: This is general information and not legal or tax advice. Individuals should consult with their own legal and financial professionals to understand their specific situation.