In-Kind Donations
Quick Definition
Non-cash contributions to your nonprofit — goods, services, or use of facilities — that have measurable value and must be properly recorded in your financial statements.
What Is In-Kind Donations?
Not every donation comes as a check. In-kind donations are contributions of goods, services, or facilities rather than cash. A local business donating 500 meals for your gala, a law firm providing 40 hours of pro bono legal work, a company letting you use their warehouse rent-free for a year — all of these are in-kind donations.
In-kind donations fall into two broad categories: goods and services. Donated goods (food, clothing, supplies, equipment, vehicles) must be recorded at their fair market value at the time of donation. Donated services are trickier. Under GAAP, you can only record donated services as revenue if they either (a) create or enhance a non-financial asset (like a contractor building a Habitat for Humanity house) or (b) require specialized skills that you would have otherwise purchased (like donated legal, accounting, or medical services from licensed professionals). General volunteer time — even if it's incredibly valuable — doesn't get recorded as revenue on your financial statements.
For the donor, in-kind gifts of goods are generally tax-deductible at fair market value (with some limitations for appreciated property). Donated services, however, are never tax-deductible for the donor, even when the nonprofit records them as revenue.
Why It Matters for Nonprofits
In-kind donations can represent a significant portion of a nonprofit's total support. A food bank might receive millions of dollars in donated food. A medical clinic might receive hundreds of thousands in donated professional services. Failing to properly record these contributions understates your organization's true size and impact.
Proper valuation and documentation are critical. If you're audited, you'll need to show how you determined fair market value for each significant in-kind gift. Over-valuing in-kind donations inflates your revenue and can mislead funders. Under-valuing them means you're not getting credit for support you actually received. Many grant applications ask for your total budget including in-kind support — getting this number right can affect your competitiveness.
Example
A free health clinic receives three types of in-kind donations during the year: (1) A physician volunteers 200 hours providing patient care — a specialized service the clinic would have otherwise paid for at $200/hour. Recorded as $40,000 in donated services revenue and $40,000 in program expense. (2) A pharmaceutical company donates $25,000 worth of medications at wholesale value. Recorded as $25,000 in donated goods. (3) Twenty volunteers spend 500 hours stuffing envelopes for the annual appeal — general volunteer time that doesn't qualify for recording, no matter how helpful. Total in-kind revenue recorded: $65,000, which increases the clinic's reported total revenue and shows funders the true scope of community support.
Key Takeaways
- ✅ In-kind donations include goods, services, and facility use — not just cash
- ✅ Donated services are only recordable if they require specialized skills or create/enhance assets
- ✅ Goods are recorded at fair market value; proper documentation is essential
- ✅ In-kind support can significantly increase your reported total budget for grant applications
How Holdings Helps
Holdings helps nonprofits track all revenue sources — including in-kind donations — in one place, so your financial reporting captures the full picture of community support.
Related Terms
Gift Acceptance Policy
A board-approved document that outlines what types of donations your nonprofit will (and won't) accept, and the procedures for evaluating non-standard gifts.
Statement of Activities
The nonprofit equivalent of an income statement — it shows your revenues, expenses, and change in net assets over a specific period, broken down by restriction type.
Fund Accounting
An accounting system that tracks money based on the restrictions donors and grantors place on it, rather than just tracking overall profit and loss like a for-profit business.
Donor-Advised Fund (DAF)
A charitable giving account managed by a sponsoring organization (like Fidelity Charitable or a community foundation) where the donor gets an immediate tax deduction but recommends grants to nonprofits over time.
Donor-Advised Fund (DAF)
A charitable giving account managed by a sponsoring organization (like Fidelity Charitable or a community foundation) where the donor gets an immediate tax deduction but recommends grants to nonprofits over time.
Grant Proposal vs Grant Report
A grant proposal asks a funder for money by describing what you plan to do; a grant report tells the funder what you actually did with the money they gave you.
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