Are Gift Cards Considered In-Kind Donations?

Charitable giving allows individuals to support causes while potentially reducing taxable income. A common question concerns the classification of gift cards donated to qualified charitable organizations. Understanding whether gift cards are considered cash or non-cash contributions is important for donors seeking tax deductions and for recipient organizations’ record-keeping. Accurate classification ensures compliance with Internal Revenue Service (IRS) guidelines.

Distinguishing Between Cash and In-Kind Donations

The IRS differentiates between two primary types of charitable contributions: cash and non-cash, often referred to as in-kind donations. Cash donations are straightforward, encompassing monetary gifts such as checks, money orders, electronic fund transfers, and credit or debit card payments. The value of a cash donation is simply the amount contributed.

In contrast, in-kind donations involve contributions of property other than money. This includes tangible items like clothing, household goods, vehicles, real estate, and securities. Valuing in-kind donations can be more complex, often requiring the determination of their fair market value, which is the price a willing buyer would pay a willing seller when neither is compelled to buy or sell, and both have reasonable knowledge of relevant facts. Unlike cash, the value of in-kind contributions is not always immediately apparent and may necessitate appraisals for larger donations.

How Gift Cards Are Classified for Donation Purposes

For tax purposes, the IRS generally treats gift cards as cash equivalent donations, not as in-kind donations of property. This applies to both general-purpose gift cards, like Visa or Mastercard, and specific-vendor cards, such as those for Amazon or department stores. This classification is because gift cards represent a specific monetary value readily convertible into goods, services, or even cash.

Unlike a direct donation of a physical item, a gift card provides the recipient charity with flexibility, similar to cash. For example, a grocery store gift card, though vendor-specific, holds a direct monetary value the charity can use to purchase food items as needed. This direct monetary representation distinguishes gift cards from traditional in-kind donations of tangible property.

Valuing Gift Card Donations for Tax Purposes

Since gift cards are classified as cash equivalents, their deductible value for tax purposes is their face value, which is the amount loaded onto the card. This simplifies the valuation process for donors and recipient charitable organizations, eliminating the need for fair market value assessments or appraisals.

Charitable contributions of cash, including gift cards, are subject to deductibility limits based on the donor’s adjusted gross income (AGI). Generally, cash contributions to public charities can be deducted up to 60% of the donor’s AGI. This limit applies to gift card donations.

Documentation Requirements for Gift Card Contributions

Proper documentation is essential for substantiating charitable contributions, including gift card donations. Because gift cards are treated as cash equivalents, they fall under the substantiation rules applicable to cash contributions. Donors must maintain specific records to support their deduction claims.

For individual gift card contributions under $250, donors can substantiate their donation with a bank record, such as a credit card statement showing the purchase of the gift card for donation, or a written communication from the charitable organization. This written communication should include the organization’s name, the contribution date, and the gift card amount.

For any single gift card contribution of $250 or more, the donor must obtain a contemporaneous written acknowledgment (CWA) from the charitable organization. This CWA must include the gift card’s face value, the contribution date, and a statement indicating whether the organization provided any goods or services in return. If goods or services were provided, the CWA must also include a description and a good faith estimate of their value. The CWA must be received by the donor by the earlier of the date they file their tax return for the year of the contribution or the due date (including extensions) of that return.