How to Write an In-Kind Donation Letter: IRS Rules and Disclosures

An in-kind donation letter is the written acknowledgment your nonprofit gives a donor who contributes property instead of cash, and federal tax law requires the donor to have it in hand for any single non-cash gift of $250 or more before they can claim a deduction.¹ The letter is short. Getting it right is mostly about knowing what belongs in it, what stays out, and when it has to reach the donor.

What the Letter Must Include

The IRS spells out the required elements for a non-cash contribution of $250 or more:

Your nonprofit’s full legal name as registered with the IRS.
A description of the donated property, without a dollar value.
A clear statement of whether your organization gave the donor any goods or services in return for the gift.
If the only thing given in return was an intangible religious benefit, such as admission to a religious ceremony, a specific statement to that effect.

A few useful items are not on that legal list. Your EIN isn’t required, but tax preparers will look for it, so include it. The donor’s name and the contribution date aren’t technically required elements of the acknowledgment itself, but a letter that can’t be tied to a specific person and gift isn’t useful to anyone. Put all three in as a matter of standard practice.

Describe the Property, Don’t Value It

This is where most letters go wrong. Describe what the donor gave; don’t assign a dollar figure. The IRS requires a description and explicitly prohibits the organization from stating a value for non-cash contributions.² Determining fair market value is the donor’s job.

Be specific enough that the items are identifiable. “Five refurbished Dell laptops” works. “Ten boxes of professional-grade roofing materials” works. “Various office supplies” doesn’t. Quantity, type, and enough detail about condition or brand to distinguish this donation from any other you received that year is the standard to aim for.

Keeping value off the letter protects your organization. If a donor inflates the number on their return, the IRS looks at the donor’s appraisal and records. The moment you put a dollar figure on the acknowledgment, you’ve put your organization into the middle of that dispute.

The Goods-or-Services Statement

Every qualifying acknowledgment needs a plain statement about whether the donor received anything in return. In most in-kind gifts, the answer is no, and the letter says so directly: “No goods or services were provided in exchange for this contribution.”

When your organization does give something back, and the donor’s total contribution is more than $75, a second rule applies. You must provide a written statement that tells the donor only the amount exceeding the value of what they received is deductible, and gives a good-faith estimate of the value of the goods or services.³ The classic example is a fundraising gala: a donor pays $500 for a ticket, the dinner and entertainment are worth $120, and the deductible portion is $380. The acknowledgment spells out all three numbers. The estimate has to be made in good faith, but a reasonable approximation of meal and benefit costs is enough.

Intangible religious benefits are exempt from this calculation. If the only thing the donor receives is admission to a religious ceremony or a similar spiritual benefit, the letter just needs to say so and doesn’t have to assign a value.²

Timing and Delivery

The donor must have the acknowledgment before the earlier of two dates: the day they file their return, or the filing deadline (including extensions) for that tax year.¹ If a donor files in February and your letter goes out in March, the deduction is gone. Most organizations send acknowledgments within a few weeks of receiving a gift, or by January 31 of the following year at the latest.

Email works. Physical mail on letterhead works. A signed PDF is fine. What matters is that the donor has the document before they file.

Donated Services and Volunteer Expenses

The value of donated time and professional services is never deductible.⁴ A lawyer who donates twenty hours of pro bono work can’t deduct the value of those hours, and your letter shouldn’t assign or suggest a dollar amount for services. Thank the donor for their contribution of time, but don’t structure the letter as if it supports a tax deduction.

Unreimbursed out-of-pocket expenses are different. If a volunteer buys supplies, pays for travel, or covers other costs directly connected to their service, those expenses can be deductible. When a volunteer’s out-of-pocket costs reach $250 or more, the acknowledgment must describe the services the volunteer provided and state whether the organization gave the volunteer anything in return.⁴ The volunteer keeps their own receipts to prove the actual expenses; your letter confirms the volunteer relationship and any reimbursement.

Vehicles, Boats, and Airplanes

Donations of motor vehicles, boats, and airplanes with a claimed value over $500 follow a different set of rules. Your organization must furnish the donor with Form 1098-C, or a written acknowledgment carrying the same information, and file a copy with the IRS.⁵

The acknowledgment must include the contribution date; the vehicle’s year, make, and model; the vehicle identification number (or hull ID for boats, aircraft ID for airplanes); and a certification about what your organization plans to do with the vehicle. If you sell it, report the sale price and date, and the donor’s deduction is generally limited to the sale price. If you plan to keep it or give it to a needy individual, certify that intended use instead.⁵

Timing is tighter here. If you sell the vehicle, the acknowledgment goes out within 30 days of the sale. If you certify that you’ll keep or use it, the acknowledgment goes out within 30 days of the contribution date.

Food and Inventory Donations from Businesses

When a business donates food or other inventory, the acknowledgment carries added language. The organization must confirm in writing that the donated food will be used only for the care of the ill, the needy, or infants; that the use relates to the organization’s exempt purpose; and that the food will not be transferred in exchange for money, property, or services.⁴

The business handles the valuation on its own Form 8283. Your letter still needs the standard elements — description of property and the goods-or-services statement — plus the food-use certification.

High-Value Gifts and Form 8283

Your letter is one piece of the donor’s paperwork, and larger gifts pull the organization into a separate document. When a donor claims more than $5,000 for a non-cash gift, they must obtain a qualified appraisal from an independent appraiser and file Form 8283, Section B. Your organization signs Part V of Section B to confirm receipt. That signature does not mean you agree with the appraised value; it only confirms that you received the property.⁶

Your organization cannot act as the appraiser for a donation it receives. When a donor asks you to help value a gift, and they will, direct them to their own qualified appraiser and to IRS guidance on determining fair market value.⁶

Penalties for Skipping the Quid Pro Quo Disclosure

Organizations that fail to provide the required quid pro quo disclosure face a penalty of $10 per contribution, up to $5,000 per fundraising event or mailing.⁷ For a large gala with hundreds of ticketed contributions, the cap comes up faster than it looks.

Keep Copies

Save a copy of every acknowledgment. Organize the archive by tax year so a donor who loses their letter, or an IRS reviewer during an audit, can be answered quickly. A simple spreadsheet listing donor name, date, and a summary of the donated property, mirroring the descriptions you used in the formal letters, makes year-end reconciliation straightforward.

1
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
2
Internal Revenue Service. Charitable Contributions: Written Acknowledgments
3
Office of the Law Revision Counsel. 26 USC 6115 – Disclosure Related to Quid Pro Quo Contributions
4
Internal Revenue Service. Publication 526, Charitable Contributions
5
Internal Revenue Service. Instructions for Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes
6
Internal Revenue Service. Charitable Organizations: Substantiating Noncash Contributions
7
Office of the Law Revision Counsel. 26 USC 6714 – Failure to Meet Disclosure Requirements Applicable to Quid Pro Quo Contributions