Despite their popularity, they are also one of the most misunderstood donations that churches receive. That’s why we’re going to cover literally everything you need to know about In Kind donations.
We’ll define what in-kind donations are, give examples, talk pros and cons, and everything else in-between.
Gifts in kind, also referred to as in-kind donations, is a kind of charitable giving in which, instead of giving money to buy needed goods and services, the goods and services themselves are given. In-kind donations are also known as non-cash donations.
In kind good examples:
In-kind service donations examples:
In the church setting, these donations could be things like a new computer for the church admin, a new soundboard for the worship center, a check-in printer for the children’s ministry, an electrician that fixes a circuit breaker for free, and more!
One of the biggest misconceptions about recording in-kind non-cash donations is how to record the value of an in-kind donation. Per IRS rules, the donor (or giver) determines the value of a non-cash contribution, not the church (or receiver).
Churches report these in-kind donations as $0.00. See the example below where a church member donated floor tiles to the church. This item was recorded with a value of $0.
If the donor desires, they can write off their donation(s) for tax purposes. That is between them and the IRS. Learn more about using ChurchTrac to record your in-kind donations HERE.
There are some situations in which a donor may request an in kind donation letter with an estimate for the value of their donation. This is typically for donations with a fair market value (FMV) of $5,000+. In these situations, the church still records the value of the goods or services with a zero dollar value in the ledger and contribution statement.
Bear in mind, there is a difference between the in-kind contribution statement and an in-kind donation letter with an estimate for fair market value. Some situations involving donations like land or animals that require additional forms and/or letters with the IRS. When in doubt, it’s always best to consult with a local tax professional.
Accepting In-Kind donations often enables churches and non-profit organizations to have goods or services at a reduced rate. Here are a couple of real-life examples to show this...
Bob is a certified electrician by trade and has offered to fix the circuit breaker and rewire the church admin office for free. This service would have cost over $500 through an outside contractor. Bob’s cost of materials is minimal, and he’s more than happy to give up his Saturday to do the work.
Jessica owns a sign company. She donates a new front sign to the church. The retail cost for this sign is $4,500. However, her wholesale cost is $1,500. She donates it for free to the church as an in-kind donation. An in-kind donation that cost Jessica’s company $1,500 ended up being a value of $4,500 to the church!
Keith owns a furniture store. He decided to donate new couches to the church with a retail value of over $3,000. The wholesale cost of those couches was $1,000. The church ended up receiving 3 times more value from the donation of couches than if they bought them on their own.
In short... In-kind donations are often a simpler way for businesses to give because they don’t have to worry about their cash flow. Additionally, businesses often pay less for goods, enabling them to donate more in goods than they could in cash.
Not all donations are beneficial for your organization. Sometimes in-kind donations can be...well...bad. The following is a true story...
"A member decided to donate their car to our church for the staff and volunteers to use. It was an extremely nice gesture.
But... it ended up being a curse in disguise.
The car donated was a Range Rover. If you’re not familiar with the brand... a Range Rover is one of the most expensive luxury suvs on the market.
The church staffers hardly wanted to drive it; especially the pastor. People tend to frown upon seeing a pastor pull up in a vehicle that’s the epitome of extravagance and excess. He might as well be wearing a Rolex and a custom-tailored suit!
On top of its stigma, the car had a lot of miles on it. Older cars with lots of miles only do one thing: Break. The repair bills quickly amounted to a small monthly mortgage. This was in addition to the added cost to insure a luxury vehicle that was hardly driven.
Long story short, that free vehicle given to us ended up costing the church thousands of dollars in repairs, upkeep, and insurance. Once the transmission went out, we quickly sold the vehicle and never looked back. What the donor thought would be a blessing to the church quickly became a huge financial burden."
Not all In Kind donations are big-ticket items. This can make accepting them even more tricky. If not careful, churches and non-profits can quickly turn into a storage facility for other people’s junk and undesirables.
Like we said earlier, In-Kind donations can also be services. Services that are unsolicited or done by an individual with improper training can quickly become a disaster.
A handy church member with good intentions attempts to fix a plumbing issue in the education building.
The problem: He’s a retired computer analyst with zero plumbing experience.
He ends up destroying the main pipe and floods half the building before someone figures out how to turn off the main valve. Professionals are called out for an emergency fix of the pipe and the original plumbing issue. You end up calling a professional biohazard cleanup service as well.
What could have been done processionally for $300 now cost $3,000. Yikes!
Patrice, a volunteer in the children’s ministry, has a few gallons of leftover scarlet paint from a home project. As a nice gesture, she decides to use that paint to repaint the toddler classroom. After all, the room was looking a little grody and she had the time to do it over the weekend.
The problem: nobody asked and Patrice is a terrible painter.
Now the room looks like a dungeon from a horror movie. Not really the vibe you were going for in a room filled with toddlers!
You end up having to paint over it with 4 gallons of primer and ultra-performance eggshell white to make the room habitable again. No big deal though...you didn’t want to spend your weekend at the lake anyways.
In a nutshell: Not all in kind donations are good. Non-profits need a written policy for accepting donations.
Writing a policy or having guidelines will help ensure that your church doesn’t accept donations that aren’t actually going to be beneficial for your mission. Think of some questions to ask that help weed out some of these donations. Ask questions like...
Google things like “Donation Policy” to give you some inspiration too if needed.
Having your donation policies shared publicly can help you save time, and possibly avoid awkward conversations with donors bringing undesirable gifts or services. It’s easier to tell Miss Lisa that your church cannot accept her generous donation of 5 cat carriers if it’s not on the list of accepted donations. 😹
Share on your website. Share on social media. Make an announcement at your next event or church service. You know the drill...
Here are a few other examples we found that could help give you some inspiration for crafting your Donation Guidelines:https://www.sogoodwill.org/donate/donate-goods/
On top of having guidelines for the services and items you accept, it’s good to have guidelines for who can approve of these donations. Limit your donation acceptance to a person or team that knows your mission and guidelines for donations.
Have you ever heard the term “too many cooks in the kitchen”?
Do you like quesadillas?
Now, I’m not one to brag... but I cook a mean quesadilla.
For me to make my world-renowned quesadillas, I have to be alone in the kitchen. I have a set of ingredients and a specific process that I follow. This process is perfectly made for one person (that’s me).
But what happens if my wife walks in the kitchen and tries to add her favorite ingredients too?
Burned Quesadillas 😤
Though you don’t risk burning any quesadillas, your organization loses 2 big things when you don’t have a designated person or process to accept donations:
It’s important to have accountability when it comes to accepting donations. This helps us ensure that the donations given to our church are actually being given to the church and are being properly recorded. This accountability minimizes the opportunity for fraud as well.
Not having a designated team or person that handles all incoming donations means that you will bring in A LOT of unwanted goods and services. A gatekeeper will help you avoid getting unwanted furniture, electronics, or in some extreme cases... old Range Rovers.
Asking for in-kind donations isn’t rocket science. Just make sure when you ask that you include these 3 things:
Here’s an example:
What: We need gently used and new baby clothes.
Why: We are sending them to an orphanage we’ve partnered with.
How: Donations can be brought to the church office during business hours.
You can ask for donations in multiple mediums. Maybe have an announcement slide before and after the service. Make a video to play during service and post on social media. Create a web page. Make handouts.
None. “Pro Bono” is just another way for a professional to say “in-kind”. The professional is giving away their services for the good of your church in this scenario. The individual providing their service pro bono will need to consult with their tax professional regarding any tax deductions.How do I determine the value of an in-kind gift?
In a situation that a donor wants you to provide a letter showing the item value, you’ll need to determine the fair market value (FMV). Determining the fair market value of a donation may require a little research. What would your organization have paid for goods at retail? If someone donated their services or time, ask their rate or what they’d have charged a previous customer for the service.Are in-kind donations tax-deductible?
Donors can claim a tax deduction for the fair market value of a donation. However, donors cannot deduct for any time or services contributed to the organization.Do churches submit 990?
Generally, churches and other church-affiliated organizations are exempt from filing IRS form 990 or 990-EZ. Reach out to your tax professional to verify.
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