How to Write an In-Kind Donation Letter

An in-kind donation letter formally acknowledges a non-cash contribution to a qualified charitable organization. This document is crucial for both the donor and recipient, as it substantiates the gift for tax purposes. It provides details for the donor to claim a potential tax deduction, emphasizing accuracy and clarity. The letter confirms the transfer of property, such as goods or services, rather than monetary funds.

Gathering Essential Information

Before drafting an in-kind donation letter, collecting precise information is a foundational step. This includes the donor’s full legal name, address, and contact details. The letter also requires the recipient charity’s complete legal name, address, and Employer Identification Number (EIN). The EIN confirms the organization’s legal standing with the IRS and is vital for donors to verify its tax-exempt status for claiming deductions.

The exact date the in-kind gift was made must be recorded accurately for tax and record-keeping purposes. A detailed description of the donated item or service is essential. This means providing specific identifiers, such as “ten gently used hardcover fiction books,” “a working 2015 Dell Latitude laptop,” or “five hours of graphic design services,” ensuring clarity.

Determining the fair market value (FMV) of the donation is a critical aspect. The IRS defines FMV as the price a willing buyer would pay and a willing seller would accept, with neither party compelled to act and both having reasonable knowledge of relevant facts. The responsibility for establishing the FMV rests with the donor, not the recipient organization.

For used goods, donors might reference online marketplaces for comparable items or use valuation guides from established charities like Goodwill or the Salvation Army. Services are generally valued at the hourly rate a professional would charge for similar work. However, the value of personal services (time and labor) cannot be deducted as a charitable contribution by the donor.

For high-value items, such as real estate, artwork, or significant collections, a qualified appraisal is often necessary, particularly if the claimed value exceeds $5,000. IRS Publication 561 offers comprehensive guidance on valuation methods and record-keeping requirements. The recipient organization’s letter acknowledges the receipt of the item but generally does not assign a dollar value, as that is the donor’s responsibility for tax purposes.

Structuring the Donation Letter

Once all necessary information has been gathered, organize it into a professional and compliant donation letter. The letter should adhere to a standard business format, including the sender’s (organization’s) address, the date, the recipient’s (donor’s) address, a salutation, the body, a closing, and a signature line.

The opening paragraph should clearly state its purpose: acknowledging the in-kind donation. This typically includes the donor’s full name and the precise date the contribution was received.

Following the introduction, provide a precise description of the donated item or service, mirroring the detailed information gathered. For instance, specify “one gently used wooden desk and matching chair” instead of “furniture.”

Careful wording is paramount when addressing the donation’s value. The letter should avoid stating a specific monetary value for the in-kind gift, as the responsibility for valuation lies with the donor. Instead, it can acknowledge the donor’s representation of the fair market value, if provided, with phrasing such as, “The donor represents the fair market value of this donation to be X,” or “The organization acknowledges receipt of [item description] for which the donor has determined a fair market value.”

A crucial element for tax deductibility is a clear statement that no goods or services were provided by the organization in return for the contribution. If any were provided in exchange, their description and a good faith estimate of their value must be explicitly stated to comply with IRS substantiation requirements.

The letter should include a sincere expression of gratitude, recognizing the donor’s generosity and the positive impact of their contribution on the organization’s mission. The closing paragraph can offer contact information for any questions the donor may have.

Finalizing and Distributing the Letter

After drafting the in-kind donation letter, a thorough review and proofreading process is indispensable. Meticulously check for accuracy in all details, including donor and recipient names, addresses, the donation date, and the description of the items. Correct any grammatical errors or typos to maintain professionalism.

The letter must be signed by an authorized representative of the recipient organization. Both the donor and the organization should retain copies for proper record-keeping. Donors need this documentation to substantiate their charitable contribution deductions, especially for non-cash gifts valued at $250 or more, as required by the IRS.

Various methods can be used for delivering the letter, including traditional mail, email, or secure online portals. Choosing a delivery method that provides a record of transmittal and receipt is advisable.

Timely delivery of the letter is important for the donor’s tax planning. For donations of $250 or more, the donor must receive the acknowledgment by the earlier of the date they file their tax return for the year of the contribution or the due date (including extensions) for filing that return. Many organizations aim to send these acknowledgments by January 31st of the year following the donation, which aligns with common tax preparation timelines.