What Are Gifts in Kind and How Do They Help Canadian Charities?

If you've ever donated clothes, food, or even your services to a charity instead of money, you've made what's called a gift-in-kind. But what does that actually mean? And how do these types of donations help charities in Canada? Let’s break it down in a way that’s simple to understand.

What Is a Gift in Kind?

A gift in kind is a donation of something other than cash. It could be physical items like books, laptops, or food, or even professional services like graphic design or plumbing. This kind of donation is often just as valuable to a charity as a cash donation.

In-kind donation meaning: It simply means you're giving goods or services instead of money.

When your charity receives monetary donations, you spend that funding on various organizational expenses. However, when you receive a gift in kind—such as free accounting services worth $3,000—you can reallocate that money in your budget to other critical needs like program delivery or community outreach.

Types of In-Kind Donations

Gifts in kind typically fall into two main categories: goods and services. Understanding these distinctions is crucial for proper accounting and CRA compliance.

Goods

A gift-in-kind of goods refers to the contribution of physical items or assets that charities can use to enhance their operations or programs. Common examples include:

• Program supplies: Items distributed directly to beneficiaries, such as food for food banks, clothing for shelters, or school supplies for educational programs
• Operational equipment: Office furniture, computers, printers, or vehicles that help with day-to-day operations
• Event materials: Auction prizes, tables and chairs for galas, or decorations for fundraising events
• Professional equipment: Medical devices for health charities, sports equipment for recreation programs, or books for libraries

While not physical goods, contributions of stocks, real estate, and other securities are also considered gifts in kind under Canadian tax law because they involve the transfer of non-cash assets.

Services

Service-based gifts in kind involve individuals or organizations contributing their time and professional expertise for services your charity would otherwise need to purchase. This is particularly valuable for smaller charities with limited budgets. Examples include:

• Professional services: Legal advice from licensed lawyers, accounting services from CPAs, or consulting from business professionals
• Creative services: Graphic design, website development, marketing campaigns, or photography for promotional materials
• Venue donations: Free use of event spaces for fundraisers, meetings, or conferences
• Maintenance services: Plumbing, electrical work, building repairs, or landscaping for charity facilities

Note: Under CRA rules, volunteer time itself cannot be receipted as a gift in kind, even when provided by skilled professionals.

Benefits of In-Kind Donations

Gifts in kind offer significant advantages for Canadian charities, donors, and the communities they serve.

For Charities:

• Direct resource acquisition: Receive exactly what you need without the procurement process
• Budget flexibility: Redirect cash that would have been spent on donated items to other critical areas
• Faster implementation: Use donated goods and services immediately without waiting for approval processes or delivery times
• Community partnerships: Build stronger relationships with local businesses and skilled volunteers
• Program expansion: Access resources that might otherwise be financially out of reach

For Donors:

• Alternative giving options: Support causes even when cash donations aren't feasible
• Environmental sustainability: Donate useful items instead of disposing of them
• Tangible impact: See direct, concrete results of their contributions
• Tax benefits: Receive charitable tax receipts for eligible gifts in kind (subject to CRA rules)
• Skill utilization: Use professional expertise to make meaningful contributions

What Is an Example of an In-Kind Gift?

Here are some in-kind donation examples:

• A company donates boxes of winter jackets to a homeless shelter.
• A dentist offers free dental check-ups at a community health clinic.
• A grocery store donates extra food to a local food bank.
• A printer offers free printing services for a charity’s fundraising event.
• An artist donates a painting for a charity auction.

These are all real-life examples of how people give in meaningful, practical ways.

What Items Are Gift-in-Kind?

Not everything can be a gift in kind, but here are some common gift-in-kind items that charities can accept in Canada:

• Furniture
• Office equipment (like computers and printers)
• Event space rentals
• Food and hygiene products
• Clothing and footwear
• Vehicles
• Art and collectibles
• Advertising services

These items must usually be in good condition and meet the charity’s needs.

What Is the Difference Between a Gift in Money and a Gift-in-Kind?

The main difference is what you’re giving:

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Both are important. A gift in money gives the charity the flexibility to spend on what they need most, while a gift-in-kind can directly provide the items or skills they might otherwise have to buy.

Gift-in-Kind Donations and Gift Acceptance Policies

The biggest challenge many Canadian charities face with gifts in kind is determining what to accept and what to decline. A well-crafted gift acceptance policy is essential for managing these situations professionally and legally.

Your gift acceptance policy should outline:

• Types of goods and services your charity can and cannot accept
• Condition requirements for donated items (new, gently used, etc.)
• Valuation procedures for different types of gifts
• Decision-making processes for unusual or high-value donations
• Procedures for declining inappropriate gifts while maintaining donor relationships

Common restrictions might include:

• No opened food products or expired items
• Equipment must be in working condition
• Professional services must be provided by licensed practitioners
• Real estate donations require board approval
• Items must align with your charitable purposes

Can You Get a Tax Receipt for an In-Kind Donation?

Yes, in Canada, you can get a tax receipt for a gift in kind, but there are rules. According to the Canada Revenue Agency (CRA):

• The item must be something the charity can use or sell.
• The value must be backed up with documentation (like an invoice or appraisal).
• The charity must officially accept and record the donation.

For example, if you donate a laptop worth $800 and provide proof of value, the charity can issue a donation receipt for that amount.

Tip: Donated services (like volunteering your time)  do not qualify for tax receipts, even if they’re valuable.

How Do You Ask for a Gift-in-Kind?

If you're a charity or nonprofit and wondering how to ask for a gift-in-kind, here’s a simple approach:

1. Know what you need – Make a list of items or services that would help your operations.
2. Reach out directly – Contact businesses or individuals who might have access to those items.
3. Be specific – Don’t just say “we need help.” Say something like, “We’re looking for a local printer who can donate 500 flyers for our food drive.”
4. Explain the impact – Let donors know how their gift will make a difference.
5. Offer a tax receipt (if eligible) – This makes it more appealing for some donors.

Why Gifts in Kind Matter

Many Canadian charities rely on in-kind donations to do their work. Not every organization can afford to buy all the items they need. Gifts in kind reduce costs, allow for more programs to run, and build stronger community partnerships.

For example, a shelter that receives donated blankets can spend more on meals. A nonprofit that gets free web design can focus its budget on outreach. Every little bit helps.

So, what is a gift in kind? It’s more than just a donation—it’s a creative way to give what you have to help others. Whether it’s a used laptop, some extra food, or even your professional skills, these types of donations are incredibly valuable to Canadian charities.

If you’re a charity, start thinking about what items or services could move your mission forward. If you’re a donor, remember: not all gifts come in an envelope—some arrive in the form of tools, talents, and time.

Recording and Reporting Gifts in Kind

Proper documentation and accounting for gifts in kind is crucial for CRA compliance and financial transparency.

Accounting for Gifts in Kind

Canadian charities must record gifts in kind at their fair market value (FMV) in their financial statements. This ensures accurate reporting and compliance with accounting standards.

Determining Fair Market Value:

• New goods: Use retail price or manufacturer's suggested retail price
• Used goods: Research comparable items, considering depreciation
• Professional services: Use the professional's standard hourly rate multiplied by time spent
• Unique items: Obtain professional appraisals for valuable or one-of-a-kind donations

Recording Process:

1. Determine the fair market value of the donation
2. Record the gift as both revenue and expense (or asset) at the same value
3. Maintain detailed documentation including photos, receipts, or professional valuations
4. File donations in a separate revenue account in your chart of accounts

Gifts in Kind and Taxes

Understanding the tax implications of gifts in kind is crucial for both charities and donors.

Are gifts in kind tax deductible?

Yes, gifts in kind are generally tax-deductible for Canadian donors, subject to CRA regulations. However, specific rules apply:

For tax receipt eligibility:

• The gift must be made to a registered charity
• Goods must have fair market value exceeding $20
• Services provided by the donor personally cannot be receipted (volunteer time)
• Proper documentation and valuation must be maintained

Charitable receipt requirements:

• Charity's full legal name and registration number
• Date the gift was received
• Description of goods or services (but not the value—donors must determine this themselves)
• Statement that no goods or services were provided in exchange
• Authorized signature from the charity

Do gifts in kind have to be reported on your charity's information returns?

Yes, Canadian registered charities must report gifts in kind on their annual information returns to the CRA. This includes:

• Form T3010: All registered charities must report total revenue, including the fair market value of gifts in kind
• Special reporting: Certain high-value donations may require additional documentation
• Provincial requirements: Some provinces have additional reporting requirements

Special considerations:

• Gifts exceeding $10,000 may require additional documentation
• Cultural property donations have specific procedures
• Vehicle donations over $1,000 require special forms

How to Solicit Gifts in Kind

Just like financial contributions, gifts in kind require strategic cultivation and clear communication about your needs.

Effective solicitation strategies:

1. Create a dedicated needs page on your website

• List specific items your charity regularly needs
• Include photos and detailed specifications
• Provide clear drop-off instructions and contact information
• Update regularly to reflect current priorities

2. Develop targeted solicitation letters

• Research donors who might have access to needed goods or services
• Write personalized appeals explaining exactly how their contribution will be used
• Include specific examples of impact and community benefit

3. Establish corporate partnership programs

• Reach out to businesses whose products or services align with your needs
• Offer recognition opportunities in exchange for significant contributions
• Develop ongoing relationships rather than one-time requests

4. Utilize online wish lists and registries

• Create Amazon wish lists or similar platforms for specific campaigns
• Share lists through social media and email newsletters
• Allow donors to purchase and ship items directly to your charity

5. Leverage fundraising events

• Request auction items from local businesses and supporters
• Ask for event supplies like decorations, catering, or venue space
• Coordinate with corporate sponsors for additional in-kind support

Best practices for successful solicitation:

• Be specific about what you need and why
• Explain how the donation will advance your charitable mission
• Provide multiple ways for donors to contribute
• Follow up promptly and professionally
• Always express genuine gratitude, regardless of the response

Maximizing Your Gift-in-Kind Program

To build a successful gifts-in-kind program, Canadian charities should:

1. Develop clear policies: Establish comprehensive gift acceptance policies before you need them
2. Train your team: Ensure staff understand CRA requirements and your charity's procedures
3. Build relationships: Cultivate ongoing partnerships with businesses and professional service providers
4. Maintain proper records: Document everything for tax, legal, and accountability purposes
5. Communicate impact: Show donors how their gifts in kind are making a difference
6. Stay compliant: Regular review policies and procedures to ensure ongoing CRA compliance

Common Mistakes to Avoid

For Charities:

• Accepting inappropriate or unusable donations due to politeness
• Failing to properly value and document gifts
• Not having clear gift acceptance policies
• Issuing incorrect charitable receipts
• Poor storage or handling of donated goods

For Donors:

• Not obtaining proper charitable receipts
• Overvaluing donated items for tax purposes
• Donating inappropriate or damaged goods
• Failing to research the charity's actual needs

Conclusion

Gifts in kind represent a powerful opportunity for Canadian charities to expand their resources, engage new donors, and advance their charitable missions. When properly managed, these donations can provide essential goods and services while building stronger community partnerships.

However, success requires careful attention to CRA regulations, proper documentation procedures, and clear organizational policies. By implementing the strategies outlined in this guide, your charity can develop a thriving gifts-in-kind program that benefits everyone involved.

Whether you're just starting to explore gifts in kind or looking to expand an existing program, remember that professional guidance can help you navigate the complexities of Canadian charity law and maximize your impact.

Ready to optimize your charity's gift-in-kind program? Contact Charity Law Group today to ensure your policies and procedures meet all legal requirements while maximizing the benefits for your organization and community.