What You Need to Know About In-Kind Contributions

Person holding a gift wrapped in red paper and ribbon.

In-kind contributions are donations that are received in a form other than cash. They can be tangible or intangible. Tangible contributions include clothing, supplies, food, materials, or anything else you can physically hold. Intangible contributions include patents, royalties, advertising, and similar non-physical items of value. In-kind contributions can also be donated services or facilities.

Any time a person or organization donates materials, services, or facilities to your nonprofit, it should be recorded in your accounting system. Sometimes it can be difficult to figure out how much to record. According to GAAP (Generally Accepted Accounting Principles) all in-kind contributions should be recorded at fair market value. Contributed services should only be recorded if the service is specialized and would have otherwise have been purchased.

For example, if I, as an accountant, donated my time to help serve meals at a food kitchen, that would not be considered a contributed service because it is not specialized. However, if I, as an accountant, donated my time to prepare a nonprofit’s Form 990, that would be considered a specialized service and should be recorded as an in-kind donation at my regular billing rate. Most contributed services recorded by nonprofits are related to accounting or legal services.

All in-kind contributions should be recorded at the time the donation is promised, or pledged, not necessarily when the donation was received by your nonprofit. Most in-kind donations will be presented on your Form 990. However, any in-kind donation received for facilities or services will not be shown on your 990 - it will be a reconciling item instead.

In-kind donations can be tricky to understand, and might not seem to be worth the effort. But any organization that does not actively solicit - and properly record - in-kind donations could truly be missing out. In-kind contributions can provide a boost to your program or pubic support financials, putting your nonprofit in a great position to attract potential donors.