What are in-kind donations and how should donors value and comply?

In-kind donations are noncash gifts—like clothing, furniture, vehicles, publicly traded stock, or even cryptocurrency—given to a qualified charitable organization. These contributions can be powerful: they let donors use appreciated assets for greater tax efficiency, help nonprofits save cash, and expand the reach of charitable programs. But unlike cash gifts, in-kind donations trigger specific valuation, substantiation, and reporting rules under the Internal Revenue Code and IRS guidance. Getting valuation and paperwork right protects your deduction and reduces audit risk.

Below I combine IRS guidance with practical steps I use in my financial-planning practice to help clients donate confidently and compliantly.

Key IRS rules and authoritative sources

All links and thresholds cited here reflect IRS guidance current as of 2025. This is educational content and not individualized tax advice—consult your tax advisor for a recommendation tailored to your facts.

What counts as an in-kind donation?

  • Tangible goods: clothing, household items, furniture, vehicles, inventory from businesses.
  • Financial assets: publicly traded stock, mutual fund shares, bonds, and cryptocurrency (treated as property by the IRS).
  • Intangibles and intellectual property: copyrights, licenses (valuation and eligibility are complex).
  • Services: generally not deductible as charitable contributions (you cannot deduct the value of your time), but unreimbursed, out-of-pocket expenses incurred while volunteering may be deductible.

How does the IRS want in-kind donations valued?

The IRS uses “fair market value” (FMV): the price a willing buyer would pay a willing seller when neither is under compulsion and both have reasonable knowledge of the relevant facts (Pub. 561). Common valuation methods:

  • Market approach: recent comparable sales (used for furniture, vehicles, etc.).
  • Comparable listing: for inventory or retail items, use comparable retail or resale prices.
  • Appraised value: for unique or high-value items, a qualified appraiser’s report that documents methodology and comparables.
  • Quoted market price: for publicly traded securities, use the average of the high and low on the donation date or the closing price, per usual practice.

Practical note from my practice: always document how you arrived at FMV. For household items, take photos, keep original receipts if available, and use reputable thrift-store or resale-price guides to support your claimed values.

Substantiation and reporting thresholds (what triggers extra paperwork)

  • Written acknowledgment ($250 rule): For any single contribution $250 or more, you must have a contemporaneous written acknowledgment from the charity describing the donation and whether you received any goods or services in return (Pub. 526).

  • Form 8283 and $500 threshold: If the total deduction for all noncash gifts on your return is more than $500, complete Form 8283 and attach it to your tax return (see Form 8283 instructions).

  • Qualified appraisal and Section B of Form 8283 (>$5,000): For any single item or group of similar items with a claimed value greater than $5,000 (except publicly traded securities and certain other exceptions), a qualified appraisal is required and Section B of Form 8283 must be completed and, in many cases, signed by the donee organization.

  • Vehicles, boats, airplanes: Special rules apply. If you claim more than $500 for a vehicle donation, the charity must provide Form 1098-C or a written acknowledgment showing either the fair market value or the amount realized on the sale of the vehicle (see Form 1098-C guidance).

Special rules for appreciated property (stocks, mutual funds, crypto)

Gifting long-term appreciated property directly to a public charity often yields two advantages:

  1. You generally deduct the FMV of the asset on the donation date.
  2. You avoid recognizing capital gains that would have been triggered on a sale.

However, deduction limits apply relative to your adjusted gross income (AGI): gifts of appreciated property to public charities are typically limited to 30% of AGI (cash gifts generally have a higher limit, often 60% of AGI). Disallowed amounts can often be carried forward up to five years. Check Publication 526 for current percentage limits and carryforward rules.

Example from practice: a client donated shares of an appreciated ETF held for 12+ months. We confirmed the holding period, transferred shares directly (avoiding a sale), and substantiated the FMV with trade confirmations. The client saved on capital gains taxes and claimed the FMV as a charitable deduction within AGI limits.

Common valuation pitfalls and audit red flags

  • Inflated values without support. The IRS may challenge FMV claims that lack comparable sales or an appraisal for high-value gifts.
  • Missing contemporaneous acknowledgments for gifts of $250+. No acknowledgment means the deduction may be disallowed.
  • Incorrect vehicle deductions. Claiming more than the charity’s sale proceeds without meeting the “significant use” or “material improvement” exceptions triggers inquiries—retain Form 1098-C or a clear written acknowledgment.
  • Claiming volunteer time as deductible income. Time is not deductible; only unreimbursed expenses are.

Penalties: Overstating the value of noncash gifts can expose donors to accuracy-related penalties (typically 20% of the portion of underpayment attributable to valuation misstatements), and serious or fraudulent misstatements can trigger higher penalties.

Practical checklist for donors (step-by-step)

  1. Confirm the organization’s tax-exempt status (IRS Tax Exempt Organization Search).
  2. Determine whether the asset is cash-equivalent, publicly traded, or unique/tangible.
  3. For publicly traded securities: obtain trade confirmations showing the donation date and FMV.
  4. For household goods and clothing: ensure items are in ‘good’ condition or better and document condition with photos and receipts.
  5. For items > $500 total: prepare Form 8283 and gather supporting documentation.
  6. For items > $5,000: obtain a qualified appraisal and attach Section B of Form 8283.
  7. For a vehicle: get Form 1098-C or a written acknowledgment from the charity.
  8. Keep a contemporaneous written acknowledgment for any gift of $250 or more.

How charities should help

A compliant charity should provide:

  • Timely written acknowledgments for gifts ≥ $250 that describe the donated property and any goods or services provided in return (required for donors to claim deductions).
  • For vehicle donations, either Form 1098-C or a written acknowledgment that includes the sale proceeds or a statement that the charity used the vehicle.
  • An estimate of value is helpful but not determinative. Charities should not provide valuations for donated property unless they have the expertise to do so; otherwise they risk misleading donors.

When to get professional help

  • The donation has a claimed FMV > $5,000 (get a qualified appraisal).
  • The property is unique, unusual, or hard to value (art, intellectual property, business interests).
  • You plan to donate concentrated stock position or cryptocurrency—coordinate with your tax advisor and custodian to transfer ownership promptly and document the donation date and FMV.

In my practice I routinely advise clients to get advance documentation for large or unusual gifts. A short appraisal or broker quote done before donation avoids confusion later and increases audit defensibility.

Related FinHelp resources

Frequently asked questions (brief)

  • Can I deduct the value of volunteer time? No. You cannot deduct the value of your time, only unreimbursed out-of-pocket expenses while volunteering (IRS Pub. 526).

  • Do I always need an appraisal? No. Appraisals are generally required when the claimed value of an item or similar group of items exceeds $5,000 (see Form 8283 instructions and Pub. 561). Publicly traded securities are exempt from that appraisal requirement.

  • What happens if the charity sells my donated asset? If the charity sells the asset, your deduction may be limited to the gross proceeds (common with vehicle donations) unless the charity used the item in a way that allows a higher deduction—follow the charity’s acknowledgment and Form 1098-C rules.

Final notes and professional disclaimer

In-kind donations are an excellent way to support causes while obtaining tax benefits, but they require careful valuation and documentation. In my 15 years advising clients, the single best protection against problems is contemporaneous paperwork: receipts, photographs, appraisals where needed, and the charity’s written acknowledgment.

This article summarizes general rules current as of 2025 and references IRS publications (Pub. 526 and Pub. 561), Form 8283 instructions, and vehicle donation guidance (Form 1098-C). It is educational and not a substitute for individualized tax advice. Consult a tax advisor or certified appraiser before claiming large noncash charitable deductions.