In-Kind Donations for Nonprofits: Rules, Examples & Free Template

Every nonprofit gets gifts that don’t show up on a bank statement. A pro bono lawyer writes the contract. A print shop prints the gala invitations. Someone with empty office space hands over a key for the summer. None of it touches the checking account — and that’s exactly why it gets miscounted, mis-recorded, and sometimes missed entirely on both the books and the Form 990.

Here’s the simple frame. A $5,000 invoice that someone tears up in your face is still a $5,000 transaction. The donor gave it. You received it. Both of you are supposed to leave a paper trail. This guide walks through what counts as an in-kind donation, what doesn’t, how to record it correctly under current FASB rules, what to put on your Form 990 (and crucially, what not to), what to send the donor — and a free template you can use today.

What an in-kind donation actually is

An in-kind donation is a non-cash contribution your nonprofit receives in the form of goods, the use of facilities or utilities, or qualifying services — valued at what your organization would otherwise have to pay for the same thing. The accounting term used in U.S. GAAP is contributed nonfinancial assets; the IRS calls them noncash contributions on Form 990.

Common examples include:

• Professional services — legal, accounting, design, IT, consulting (only when they meet the services criteria in the next section).
• Goods — equipment, computers, software licenses, supplies, food, clothing, medical or program materials.
• Use of facilities or utilities — donated office space, event venues, parking, internet, electricity.
• Intangible assets — patents, copyrights, royalty-free media licenses.

Fitting this in with the rest of your books is easier if you have a clean nonprofit chart of accounts from the start — the fund accounting structure underneath determines how cleanly in-kind shows up in your financials.

What does NOT count as in-kind

The boundary trips up almost every small nonprofit. Under U.S. GAAP, the following are generally not recorded as in-kind donations:

• General volunteer time. A volunteer stuffing envelopes, staffing an event, or driving a van does not create a recordable in-kind contribution — even though their time is genuinely valuable.
• Board member service. Time spent governing the organization is not an in-kind contribution.
• Ordinary discounts. A vendor knocking 30% off an invoice is a discount, not a donation. The transaction is recorded at the discounted price.
• Informal help without documentation. If there’s no record and no good-faith FMV, there’s no in-kind entry.

A useful nuance: a volunteer’s reimbursable out-of-pocket expenses (mileage, supplies they bought) can sometimes be treated as a cash contribution when the volunteer signs them over — but the volunteer’s time still isn’t in-kind.

The services rule most nonprofits get wrong

This is the part the older guides skip. Under FASB ASC 958-605, donated services are only recognized as in-kind contributions when they meet one of two specific criteria:

Practical translation: a CPA’s donated tax work qualifies. A friend who’s helpful with spreadsheets organizing your files generally doesn’t — even though both gave their time. Both criteria matter, especially the second one. Specialized skill alone isn’t enough; you also have to be the kind of organization that would otherwise pay for the work.

How to record in-kind donations

Whatever the category, in-kind donations are recorded at fair market value (FMV) — the amount your nonprofit would have paid for the same goods, services, or use, on the date received. Here’s how three common scenarios look on the books:

In each case, both sides of the entry hit at the same time, so the financials reflect the true value of support received without overstating cash. If you’re sorting out how this fits with restricted gifts, see restricted vs. unrestricted funds — in-kind gifts can also be donor-restricted in purpose or time.

ASU 2020-07: the FASB rule that changed presentation

If your auditor or 990 preparer mentioned “ASU 2020-07” and you nodded politely without knowing, this section is for you. It’s a real rule, it’s already in effect, and it changes how in-kind shows up on your audited statements.

What ASU 2020-07 actually requires:

• Present contributed nonfinancial assets as a separate line item on the statement of activities — not buried inside total contributions.
• Disclose by category (e.g., legal services, equipment, supplies) the qualitative information about each.
• Indicate whether each category was monetized or used, and if used, in which programs.
• Disclose the nonprofit’s policy on monetizing rather than using contributed nonfinancial assets.
• Describe any donor-imposed restrictions and any valuation techniques and inputs used to arrive at FMV.

If your nonprofit follows GAAP for audits, grant reports, or sophisticated funders, this isn’t optional. Cleaning up in-kind tracking now — not at audit time — is much easier; the same principle applies as in avoiding bookkeeping mistakes generally and to audit preparation.

GAAP vs. Form 990: where they disagree

Here’s a point that confuses experienced bookkeepers, let alone first-time treasurers: your audited financials and your Form 990 will not show the same in-kind revenue. The difference is intentional, and getting it backward is one of the more common 990 errors.

The practical impact: a nonprofit that received $50,000 of pro bono legal work and $30,000 of donated office space will look bigger on its audited statements than on its 990 by $80,000 — because Form 990 instructions explicitly exclude both donated services and the donated use of facilities, equipment, or materials from Part VIII line 1g. That’s correct — not an error. Your auditor will reconcile the difference; just don’t try to “fix” the 990 by adding donated services or facility use to line 1. (For other 990 traps, see common Form 990 mistakes.)

Schedule M and the donor’s $250 rule

Two paperwork rules sit on top of in-kind — one for you, one for the donor.

For the nonprofit — Form 990 Schedule M. File Schedule M when your total noncash contributions for the year exceed $25,000 (Form 990 Part VIII line 1g), or when you received any amount of art, historical treasures, similar assets, or qualified conservation contributions. Schedule M asks you to break down noncash gifts by category, count them, and describe how you determined FMV.

For the donor — the $250 acknowledgment. Under IRC §170(f)(8), a donor cannot claim a federal tax deduction for any single contribution of $250 or more without a contemporaneous written acknowledgment from your nonprofit. Your acknowledgment must describe the donation, state whether you provided any goods or services in return, and, if so, include a good-faith FMV of those goods or services. There’s no IRS form for this — a letter, email, or receipt is fine. The IRS lays it out in Publication 1771.

A few additional donor-side flags worth knowing:

• Form 8283 — the donor files this for noncash contributions over $500. For donations valued over $5,000, the nonprofit signs Section B Part V (Donee Acknowledgment) acknowledging receipt (see Form 8283 instructions).
• Vehicles, boats, and airplanes — special rules apply. The nonprofit generally provides a Form 1098-C (or equivalent statement) and the donor’s deduction depends on what the nonprofit does with the asset.
• Qualified appraisal — donors deducting over $5,000 in noncash gifts generally need one, with very limited exceptions.

None of this is the nonprofit’s tax problem — but your donors will ask, and a one-page acknowledgment template (below) handles 90% of it.

Common in-kind mistakes to avoid

• Recording volunteer hours as in-kind. They’re valuable, but not GAAP in-kind unless the services test is met.
• Guessing FMV without support. Use the donor’s standard rate, an invoice, or a comparable quote — and document how you arrived at it.
• Treating ordinary discounts as donations. A reduced price is a price, not a contribution.
• Putting donated services on Form 990 Part VIII line 1. Services belong in your GAAP books, not on that line of the 990.
• Forgetting Schedule M when noncash contributions cross $25,000, or when any art / historical / conservation gift arrives.
• Skipping written acknowledgments for $250+ gifts. The donor can’t deduct, and that becomes your reputation problem.
• Recording facility use as a one-time gift. Use of space is usually recognized over the period received, not as a single entry.

Documentation and free template

For every in-kind donation, keep the following on file:

Below is a one-page record you can copy into a Google Doc, Word, or Sheets and adapt to your organization. It doubles as the donor’s written acknowledgment when the donor signs and you keep a copy.

For the donor’s side — the “contemporaneous written acknowledgment” that satisfies IRS Publication 1771 — this same form, signed and returned to the donor on your letterhead, generally does the job for gifts under $5,000. For larger goods donations, the donor may need a qualified appraisal and Form 8283 in addition.

If you’re setting up your books from scratch, our first 90 days of nonprofit bookkeeping guide pairs well with this article — and clean in-kind tracking makes your financial statements noticeably easier to read for the board.

Working with GivingArc

If in-kind tracking has been a question mark on your books — missing entries, uncertain valuations, an upcoming audit, or simply not knowing how your 990 should handle it — GivingArc can review your current setup and put a clean, ASU 2020-07-compliant structure in place. We help with the bookkeeping, the Form 990, and the donor acknowledgments, so your in-kind story holds up to a funder, an auditor, or the IRS.

GivingArc provides bookkeeping, Form 990 preparation, and nonprofit-specialized accounting for small and mid-size 501(c)(3) organizations across the US. This article is general information, not tax or legal advice. Reviewed by Min Kim, CPA.