How to Deduct In-Kind Contributions

In-kind contributions provide something of value to an organization or charity without cost. To deduct in-kind contributions, you must take steps to be sure that the amount you are claiming is allowable and accurate. Examples of in-kind contributions include loans of space to a non-profit group, donations of paper for printing books or a professional donating his time to help with the program.

Difficulty: Moderately Challenging

Instructions

1. Determine if your in-kind contributions are able to be deducted. The donated item, service or other type must have a cash value that can be proven and it must go to an approved non profit, charitable organization. To deduct in-kind contributions if you are unsure of this value, talk to your tax accountant for clarification.

2. Deduct contributions including supplies, time, materials and services based on the local cost of such products or services. Professionals deduct the amount of at a standard rate per hour of service. Materials and supplies, as well as room rentals and other types of in-kind donations deducted should be based on the local cost of these items.

3. Take specific steps to accurately account for the in-kind contribution, which includes getting an estimated value of the donation and time included. Proper accounting of the contribution is necessary for IRS verification should it become necessary. Follow your tax professionals advice on how to keep records and how long to do so.

4. Use Form 1040 Schedule A to deduct in-kind contributions. The charity must provide written acknowledgment of the donation of over $250 and the recipient must fall under a qualified organization according to IRS law. Consult IRS law on in-kind contributions to follow reporting information correctly, available at the IRS website.

Who Can Help:

• eFax is the world’s #1 Internet fax service.  Send and receive faxes by email and kiss your fax machine goodbye. 30-Day Free Trial

Resources

• View IRS rules and forms for in-kind contributions.