Carol,
My homeschool group (a 501c3 nonprofit) was donated $500 in science equipment. How to I record a gift like this in my record keeping? We use QuickBooks.
How wonderful to receive such a generous donation. As a 501(c)(3) tax exempt organization the donation is a tax deductible contribution for your donor.
Thank the donor
First, be sure to thank the donor with a nice letter. State what the donation was (science equipment) but not the dollar amount. Only state the dollar amount when the gift is cash.
And be sure to include this note: “No goods or services were provided in exchange for this donation.”
Understand in-kind donations
A contribution that is paid or given in goods, commodities, or services instead of cash is called an “In-kind” contribution.
Free Church Accounting offers some great information on accepting and recording in-kind donations for small nonprofits like homeschool groups.
There are typically three categories of in-kind donations. They are
- contributions of tangible and intangible goods
- use of property
- donations of services
Tangible gifts in-kind (physical goods that can be touched or held) include: furniture, equipment, food, clothing, supplies.
Example: The donation of science equipment is a tangible in-kind contribution.
Intangible gifts in-kind (goods have value but do not have a physical presence) include: trademarks, copyrights, patents, royalties, advertising.
Example: If a member of your homeschool group lets you print copies of her book or curriculum at no cost she has granted you an in-kind contribution of her copyright.
Use of property include free leased space and discounted rent.
Example: A church lets your homeschool co-op use their building for free.
Professional services given as gifts in-kind include services of accountants and bookkeepers, lawyers, plumbers or electricians, computer programmer, designers, technical support, etc.
Example: One of your members is an attorney and created bylaws for your organization.
Recording donations of in-kind contributions
Some small homeschool organizations don’t record in-kind contributions at all because they do not have to report financial statement to the IRS (they file the Form 990-N) or don’t use accounting software.
But if you would like to record your in-kind contributions in your accounting software here are a few examples from Free Church Accounting
An accountant donates 5 hours a month to do some accounting work that your organization would have had to pay another accountant to do. She regularly charges $100 per hour to do a similar service. To record this gift in-kind you would:
- Debit Professional Service In-Kind $500
- Credit In-Kind Contributions $500
Important reminder: Thank your donor for their services, but do not give them a tax deductible receipt for the value of their services. Donors cannot take a deduction for the time that they donated. Only donations of cash, tangible and intangible goods are tax deductible, not the value of services.
A business donates a portable building valued at $12,000. Assuming that your organization has a policy to capitalize assets of this value (meaning you depreciate the value over several years), you would record this gift in-kind like this:
- Debit the fixed asset account (Portable Building In-Kind) $12,000
- Credit the In-Kind Contributions $12,000
A person donates an computer valued at $400. Assuming that your organization has a policy to expense assets of this value (meaning you do not depreciate it; you deduct the full amount as an expense in one year), you would:
- Debit the Equipment In-Kind (expense account) $400
- Credit the In-Kind Contributions $400
Have more questions about properly recording your income, expenses and contributions? My book Money Management in a Homeschool Organization can help.
Or contact me to get help with your accounting set up and transactions. I can refer you to a cadre of homeschool parents with experience in bookkeeping.
Carol Topp, CPA