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How to work with in-kind gifts

Posted July 19, 2019 by Virginia Davidson

In-kind gifts can save your organization money, expand your network of supporters, and bolster your organization’s ability to fulfill its mission. Working with these types of gifts requires the same diligence and attention that you give to financial gifts, but there are some important distinctions. Here are some key points to keep in mind.

Soliciting in-kind gifts

When asking for donations, be specific about the types of items your organization needs. Make a list of those items, and also list the items you don’t need. As with any gift acceptance policy, it’s in your best interest to be explicit about what you’ll accept versus items you won’t accept. This allows you to politely decline offers of donations that don’t meet your organization’s needs.  

 

Recording in-kind gifts

When you enter in-kind gifts in your database, be sure to code them so that you can distinguish these gifts from financial gifts. If you’re using Little Green Light as your donor management system, you’ll assign the gift type of “in kind”. It is best to record a tax-deductible amount for in-kind gifts of $0 unless you have a verified third-party appraisal or the donor provided documentation of the fair market value dollar amount (refer to IRS Publication 561 for further details). Note that donors may receive a tax deduction for gifts of goods but not for donated time.

 

Acknowledging in-kind gifts

It’s a good idea to create an acknowledgment letter template specifically to use for in-kind gifts. This letter should provide a description of the item donated but should not include an estimate of the value (remember that it is the donor’s responsibility to seek the fair market value). When possible, let the donor know how their gift will be used because that will encourage them to continue to support you in the future.

 

Going forward

In-kind gifts can bring in much-needed supplies for your organization and expand your network to include companies and individuals who might not make a cash gift to your organization. Don’t forget about these donors after you send your acknowledgment letter. Include them in your newsletter mailings and other communications your organization sends to your donors, and consider sending them a follow-up thank you letter a few months after their gift as an additional expression of gratitude. 

5 thoughts on “How to work with in-kind gifts

  1. When recording an in-kind donation in LGL is it best practice to put the value of the item in the Amount field and the verified tax-deductible amount in the Deductible field? I’m just curious since we’re not actually receiving financial income from the item and want to be sure we’re recording it correctly.

  2. Your article indicated that donors cannot get a tax deduction for donated time. That time has value for the non profit thought. Could that time be recorded & how? We had volunteers paint the whole inside of a building & hope to have teaching volunteers for our school programs..

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