Accepting donated goods, services and stock

This guide is for small charities that get offered things instead of money: a pickup truck of furniture, a laptop, a used car, shares of stock, a lawyer's free afternoon. These gifts can be a real help. They can also cost you storage, staff time and IRS paperwork. After reading, you'll know how to decide what to accept, who values what, which forms your charity signs or files, and how to handle the two most common larger gifts: vehicles and stock.

Decide what you'll accept before someone offers it

The hardest moment to say no is when a kind donor is standing in your doorway with a sofa. Decide in advance. A short gift acceptance policy (a board-approved list of what you take, what you don't, and who decides on anything unusual) lets you say "thank you, but our policy doesn't allow it" without it feeling personal. Our gift acceptance policy template is a good start.

Before saying yes to any noncash gift, ask:

• Can we use it in our programs, or sell it easily? If neither, it's a cost, not a gift.
• What will it cost us? Storage, moving, repairs, insurance, disposal.
• Does it carry risk? Vehicles, real estate, firearms, food and anything with safety rules need extra care.
• Is it unusual? Real estate, art, private company shares and collectibles should go to your board and an accountant before you agree.

Valuing the gift is the donor's job

Your charity does not put a dollar value on donated property in your thank-you letter. Publication 1771 says the written acknowledgment includes "a description (but not the fair market value)" of property. IRS Publication 561 is written "to help donors and appraisers" figure out value. If a donor asks what their used clothes are worth, point them to Publication 561 or their tax preparer.

For property, describe it clearly instead: "a 2019 laptop in working condition," "eight bags of adult clothing." Our guide to thanking donors the way the IRS requires covers the full acknowledgment rules, and the thank-you letter template has a version for noncash gifts.

What your charity might sign: Form 8283, Section B

Form 8283 is the form donors attach to their own tax return to report noncash gifts. Per IRS Publication 526, a donor files it when their total deduction for noncash gifts for the year is more than $500. Most of it has nothing to do with you.

The exception is Section B, which the donor uses for items, or groups of similar items, they value at more than $5,000 (publicly traded stock is reported in Section A instead, so it doesn't come to you). For most of those gifts the donor needs a qualified appraisal, and the charity completes Part V, Donee Acknowledgment.

What you're signing, in the form's own words:

• you're a qualified charity and you received the property on a stated date,
• if you sell, exchange or otherwise dispose of it within 3 years, you'll file Form 8282 and give the donor a copy, and
• "this acknowledgment does not represent agreement with the claimed fair market value."

You also answer whether you intend to use the item for a purpose unrelated to your mission. The instructions say the person signing must be an official authorized to sign your tax returns, or someone specifically designated to sign Form 8283. Keep a copy of every Section B you sign. Form 8282's instructions require it.

Selling within three years: Form 8282

If you sell, trade, use up or otherwise dispose of property that was listed on a Section B you signed (or that another charity passed to you with its Section B), within 3 years after you received it, you must file Form 8282 with the IRS and give the donor a copy. The form's instructions call this property "charitable deduction property": donated property other than money and publicly traded securities, with a claimed value over $5,000 per item or group of similar items.

According to Form 8282's instructions:

• Deadline: file within 125 days after the date you dispose of the property.
• Exception 1: items the donor marked on Section B as appraised at $500 or less. All shares of private stock, or items that form a set, count as one item for this test.
• Exception 2: items used up or given away free in carrying out your mission, such as medical supplies handed out after a disaster.
• Passing it on: if you give the property to another charity within the 3 years, you must give that charity a copy of Section B and your details within 15 days after the latest of the transfer date, the date you signed Section B, or the date you received it from another charity.
• Signature: the form must be signed by an officer.

Penalties can apply for not filing or for filing wrong information. If you check "yes" on Form 8282 that you used the property for your mission, an officer signs that under penalty of perjury, so only say so if it's true.

Vehicles, boats and airplanes: Form 1098-C

Car donations follow their own rules. If a donor gives you a car, boat or airplane with a claimed value over $500, the Form 1098-C instructions say you must:

• give the donor a written acknowledgment with the information on Form 1098-C (Copy B of the form can serve), generally within 30 days of selling it or, in some cases, of receiving it, and
• file Form 1098-C with the IRS.

Without it, the donor can't deduct more than $500. In most cases the donor's deduction is limited to what you sold it for, which is why the form reports the sale price. There are exceptions if you make significant use of the vehicle in your programs, make major improvements to it, or give or sell it well below its value to a person in need.

If you expect more than the occasional car, read the 1098-C instructions in full or work with an accountant.

Donated services and time

A volunteer's time, or a professional's free work, is not a deductible gift. Publication 526 says plainly: "You can't deduct the value of your time or services." Thank people warmly, but don't put a dollar value for their time on any receipt. Some volunteers can deduct unreimbursed out-of-pocket costs; the acknowledgments guide explains what to send them.

In-kind gifts on your own books

Recording donated goods and services in your own accounts is a separate question from the donor's tax deduction. How you record them, and at what value, depends on accounting standards and on what your Form 990 asks. Some donated professional services are recorded and some aren't. Ask your accountant or bookkeeper to set up a simple method, and keep a log of every noncash gift: date, donor, description, and what you did with it. That log also tells you when Form 8282 might apply.

Gifts of stock

Stock gifts can be very generous and fairly simple, if you're ready.

• Open a brokerage account in your charity's name before you need it, so a donor's broker can transfer shares straight to you.
• Write down the transfer details (your account and the broker's transfer instructions) and keep them where your treasurer can share them quickly.
• Find out who sent it. Transfers can arrive without the donor's name. Ask donors to tell you before they give.
• Decide when to sell. Many small charities sell right away to avoid market risk. Put this in your gift acceptance policy.
• Acknowledge it correctly. Describe the shares (number and company) without stating a dollar value. Publication 561 explains how the donor values publicly traded stock: the average of the highest and lowest selling prices on the date of the gift.

The gift date matters to the donor. Per Publication 526, a properly endorsed certificate mailed or delivered to you is given on the date it's mailed or delivered. If the donor sends it through their agent or the company to be reissued in your name, it isn't given until the shares are transferred on the company's books.

Who files what

Noncash gifts checklist

• Our board has approved a gift acceptance policy
• We never state a value for donated property
• We know who is authorized to sign Form 8283
• We keep copies of every Form 8283 Section B we sign
• Our gift log flags items that may need Form 8282
• We know the Form 1098-C steps before accepting a vehicle
• We have a brokerage account ready for stock gifts
• Our accountant has told us how to record in-kind gifts