Tracking In-Kind Donations: Step-by-Step Guide

Tracking in-kind donations refers to the process of recording, documenting, and managing non-cash contributions—such as goods or services—donated to a nonprofit or parish. This involves capturing essential details like the donor's name, the type of item or service donated, its estimated fair market value, and the date and intended use of the donation. Accurate tracking ensures transparency, supports proper donor acknowledgment, and maintains compliance with IRS regulations, which require nonprofits to report significant in-kind contributions. It also aids in budgeting, financial reporting, and demonstrating the full scope of donor support beyond monetary gifts.

The step-by-step guide in tracking in-kind donations are listed below.

1. Identify In-Kind Donation Opportunities, such as goods, services, or expertise that your parish or nonprofit needs but cannot currently afford. Reach out to businesses or individuals who may be willing to contribute these resources as part of their charitable giving.
2. Track Donation Requests and Responses, by maintaining a log of outreach efforts and recording which donors have pledged or declined support. This helps you stay organized, follow up effectively, and avoid duplicating efforts.
3. Create a List of Donated Items and Services, including the donor's name, date of donation, and intended purpose. This list should be updated regularly to ensure accurate reporting and acknowledgment.
4. Determine Fair Market Value for Each Gift, based on current retail or professional service rates. Accurate valuation is essential for financial reporting and for issuing appropriate donor receipts.
5. Record Donations in the CRM, by entering details such as item type, value, donor information, and any related notes. This centralizes your records, making it easier to track trends and generate reports.
6. Send a Receipt to Each Donor, acknowledging the donation and stating the fair market value, if applicable. Include a sincere thank-you message and ensure the receipt meets IRS substantiation requirements.

1. Identify In-Kind Donation Opportunities

Identify In-Kind Donation Opportunities refers to the process of recognizing specific goods, services, or professional expertise that a nonprofit or parish needs but cannot easily obtain through its budget. The purpose is to meet operational or programmatic needs through non-cash contributions that provide tangible value. This step is crucial because it helps maximize available resources while engaging community members and businesses in meaningful support. It works by evaluating current organizational needs—such as office supplies, volunteer services, or maintenance labor—and then identifying potential donors who may be willing to fulfill those needs, either through existing relationships or targeted outreach.

2. Track Donation Requests and Responses

Track Donation Requests and Responses means maintaining organized records of when, to whom, and how donation requests are made, along with tracking donor replies. The purpose of this process is to ensure consistent follow-up, maintain donor relationships, and assess fundraising effectiveness. Its importance lies in minimizing missed opportunities, avoiding duplicate asks, and enabling better planning for future campaigns. It works by using spreadsheets or donor management systems to log each outreach, document the status (e.g., pending, declined, confirmed), and follow up accordingly to build rapport and increase the likelihood of successful in-kind contributions.

3. Create a List of Donated Items and Services

Create a List of Donated Items and Services involves compiling a detailed inventory of all in-kind contributions received, including descriptions, donor information, and intended use. The purpose of this list is to track, acknowledge, and report donations accurately, supporting transparency and accountability. This is important for audit readiness, donor communication, and compliance with IRS regulations. It works by recording each donation as it is received—either manually or through accounting software—ensuring that every item or service is documented for financial reporting and stewardship purposes.

4. Determine Fair Market Value for Each Gift

Determine Fair Market Value for Each Gift means assigning a reasonable monetary value to each in-kind donation based on what it would cost in the open market. The purpose is to reflect the true financial impact of donations on the organization's operations and to comply with tax reporting standards. This process is critical for issuing accurate donor receipts and for financial statement integrity. It works by researching comparable market prices for the donated items or services—such as using catalogs, price lists, or professional quotes—and documenting the rationale behind the valuation in the organization's records.

5. Record Donations in the CRM

Record Donations in the CRM (Customer/Constituent Relationship Management) refers to entering all relevant donation details—such as donor name, donation type, value, and date—into a centralized software system. The purpose is to consolidate donor and contribution data for easy access, communication, and reporting. This is important because it streamlines donor stewardship, improves data accuracy, and supports effective fundraising strategies. It works by creating individual donor profiles and logging each in-kind gift within the CRM, allowing staff to generate contribution statements, analyze donor trends, and personalize follow-up communications.

6. Send a Receipt to Each Donor

Send a Receipt to Each Donor is the process of providing formal acknowledgment of an in-kind donation, typically including the date, description of the gift, and, when applicable, the fair market value. The purpose is to thank the donor and fulfill legal requirements for charitable contribution documentation. This is important because it enhances donor trust, encourages future giving, and ensures IRS compliance for gifts exceeding $250. It works by using templates or donor management tools to generate and send receipts via mail or email promptly after the donation is received, including a gratitude message and necessary tax language.

Why is it important to Track In-Kind Donations?

Tracking in-kind donations is essential because it ensures accurate financial reporting, supports transparency, and helps nonprofits acknowledge donor contributions appropriately. These non-cash gifts—such as goods, services, or volunteer labor—have real economic value that must be recorded for compliance with IRS regulations and for generating meaningful donor receipts. Proper tracking allows organizations to evaluate the true cost savings from in-kind support, include them in audits, and incorporate them into budgets and financial statements. It also strengthens donor relationships by ensuring timely acknowledgments and showing how contributions are utilized for mission impact.

What are Examples of In-Kind Donations?

Examples of in-kind donations include tangible goods like office equipment, food, clothing, or building materials, and services such as legal advice, graphic design, transportation, or event hosting. These donations provide direct value to nonprofits without requiring a monetary transaction. For instance, a business might donate printing services for a church bulletin, or a local farmer might provide produce for a parish food pantry. Each example reduces operating costs and enhances program delivery, making in-kind gifts a vital supplement to cash donations.

Are In-Kind Donations taxable?

No, in-kind donations are not taxable as income to the nonprofit if they are used in accordance with the organization's tax-exempt purpose. However, donors may claim a tax deduction based on the fair market value of the donated items or services, subject to IRS rules. The nonprofit must provide a receipt describing the donation but does not assign a value—donors are responsible for valuation. For contributions exceeding $5,000, donors may need a qualified appraisal to substantiate their deduction. Tracking and proper acknowledgment are key to compliance and donor benefit.

How can ParishSOFT assist in Tracking In-Kind Donations?

ParishSOFT assists in tracking in-kind donations by offering integrated tools within its giving and accounting modules that allow parishes to record, categorize, and report non-cash gifts accurately. Users can input detailed information such as donor name, description of the donation, estimated fair market value, and its intended use. These records are linked to donor profiles and can be included in contribution statements and year-end tax reports. By centralizing data in a secure cloud-based system, ParishSOFT ensures compliance with IRS standards while streamlining donor communication and financial transparency.