What Are In-Kind Donations? AGI Limits and Appraisal Rules

An in-kind donation is a gift of property (not cash) to a qualified charity, and you can deduct it on your federal income tax return if you itemize. The tax deduction for in-kind donations usually equals the property’s fair market value on the date you give it, but that amount can be reduced by how long you held the item, what the charity does with it, and how well you document the gift. Get any piece of that wrong and the deduction shrinks or disappears entirely.

Property that qualifies includes tangible items like vehicles, clothing, equipment, artwork, and real estate, along with intangible assets like publicly traded stock, bonds, and patents. What does not qualify: the value of your time or services. A lawyer who donates 40 hours of pro bono work gets no deduction for those hours, though out-of-pocket costs tied to volunteer work (travel, materials purchased for the charity) are deductible.¹ You also generally cannot deduct a gift of a partial interest in property, with a narrow exception for an undivided fractional interest where the charity gets a percentage of your entire ownership stake.²

You Have to Itemize

Non-cash gifts are only deductible if you itemize on Schedule A of Form 1040. For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.³ If your charitable gifts, mortgage interest, state and local taxes, and other itemized deductions do not add up past that threshold, taking the standard deduction leaves you better off and the property donation produces no tax benefit. A new above-the-line deduction taking effect in 2026 covers up to $1,000 ($2,000 joint) of charitable giving for non-itemizers, but only for cash. Non-cash property still requires Schedule A.

How Much You Can Deduct

The starting point for most in-kind gifts is fair market value: the price the property would fetch between a willing buyer and a willing seller who both know the facts and are not being forced.⁴ Whether you actually get to deduct that full amount depends on what type of property you gave.

Long-Term Capital Gain Property

Property you held longer than a year that would produce a long-term capital gain if sold gets the most favorable treatment. You can generally deduct the full fair market value and skip the tax on the built-in appreciation. Stock you bought for $5,000 that is worth $20,000 after two years produces a $20,000 deduction, and you never pay tax on the $15,000 gain.¹ This is why appreciated securities are so often the recommended vehicle for large charitable gifts.

Ordinary Income and Short-Term Property

If selling the property would produce ordinary income or a short-term capital gain, your deduction drops to fair market value minus the portion that would have been ordinary income or short-term gain. In practice this usually caps you at your cost basis. Business inventory, artwork you created yourself, and stock held one year or less all fall in this category. Buy stock for $1,000, donate it ten months later at $1,500, and your deduction is $1,000, not $1,500.¹

Used Clothing and Household Items

Clothing and household items are deductible only if they are in good used condition or better.¹ Worn-out shoes or a broken appliance will not qualify. For items that pass the test, value them at what similar items actually sell for in thrift shops and consignment stores, not what you originally paid.

Annual Limits Based on Your AGI

The IRS caps the total charitable deduction you can take in one year at a percentage of your adjusted gross income. The applicable percentage depends on what you gave and who received it.¹

50% of AGI for non-cash ordinary income property given to public charities.
30% of AGI for capital gain property (deducted at full FMV) given to public charities, and for cash or ordinary income property given to private foundations.
20% of AGI for capital gain property given to private foundations.

You can elect to reduce your deduction for capital gain property down to cost basis, which raises the applicable ceiling from 30% to 50%. That trade sometimes helps when the appreciation is modest. Anything above the ceiling in the current year carries forward for up to five years and keeps its original character; a 30%-limit gift stays subject to the 30% ceiling in later years.⁵

The Related-Use Rule for Tangible Property

When you donate tangible personal property (artwork, collectibles, equipment) that qualifies as capital gain property, the charity’s actual use of the item determines your deduction. If the charity uses the property in a way related to its exempt mission (a museum hanging a donated painting in its galleries), you deduct full fair market value. If the use is unrelated (the museum sells the painting to fund operations), your deduction drops to cost basis and you lose the benefit of the appreciation.⁵ The rule applies only to tangible personal property; it does not touch donations of real estate or stock. Before handing over anything valuable, get the charity’s intended use in writing.

Vehicles, Boats, and Airplanes

Cars, boats, and planes worth more than $500 have their own stricter regime. If the charity sells the vehicle without using it first, your deduction is limited to the gross sale proceeds the charity actually receives, not the fair market value you might see on Kelley Blue Book. Charities often auction donated vehicles quickly, and the sale price tends to disappoint the donor. You can claim full FMV only if the charity makes significant intervening use of the vehicle, makes material improvements beyond basic cleaning, or gives or sells it at a steep discount to someone in need.⁶

The charity must furnish Form 1098-C within 30 days of selling the vehicle, and you need that form in hand before you can claim the deduction.⁷

Patents, Copyrights, and Other Intellectual Property

Intellectual property is treated differently from other appreciated assets. Your initial deduction is limited to the lesser of cost basis or fair market value, so the long-term capital gain benefit does not apply. The tradeoff: you may claim additional deductions in later years based on the income the charity earns from the property, starting at 100% of net income in the first two years and stepping down through year 12.¹ You have to notify the charity at the time of the donation that you plan to claim these additional deductions, and the charity reports the income to you on Form 8899.

Documentation Requirements by Dollar Amount

The paperwork rules are tiered, and each tier stacks on top of the last one. Missing a step does not reduce your deduction. It eliminates it. Courts routinely uphold the IRS on this even when the donor clearly gave the property and the valuation is defensible.

Under $250

Keep a receipt from the charity showing its name, the date, and a description of the property. If a receipt is not practical (unattended drop-off bins, for example), keep your own written records with the items, their condition, the fair market value, and how you arrived at it.¹

$250 or More

Any single contribution worth $250 or more requires a contemporaneous written acknowledgment from the charity, in your hands before you file. It must include the charity’s name, the date, a description of the property, and a statement about whether you received anything in return. The charity does not state a value; that is your responsibility. And the charity has no obligation to send the acknowledgment on its own — you have to ask.⁸

Non-Cash Deductions Over $500

When your combined non-cash contributions for the year exceed $500, file Form 8283 (Noncash Charitable Contributions) with your return. Section A handles items or groups of similar items valued from $500 to $5,000. Section B handles items over $5,000.⁹

Over $5,000: The Qualified Appraisal

Any single item, or group of similar items, claimed at more than $5,000 requires a qualified appraisal and triggers Section B of Form 8283. The appraisal must be signed and dated no earlier than 60 days before the donation and no later than your filing deadline including extensions.⁴ The charity also has to sign the donee acknowledgment on Part B.

The appraiser needs verifiable education and experience with the specific type of property. For anything other than real estate, that means relevant coursework plus at least two years of experience buying, selling, or valuing that asset class. For real estate, the appraiser must be licensed or certified in the state where the property sits.¹⁰ The fee for the appraisal is not itself deductible as a charitable contribution.

Publicly traded securities are the one big exception. Even a $500,000 stock donation goes on Section A, and no qualified appraisal is required, because the market already establishes a daily price.⁹

When You Get Something Back

If you receive a benefit in exchange for your donation (a gala dinner, event tickets, a gift basket), your deduction is reduced by the fair market value of what you got. Give property worth $500 and receive a $100 dinner, and the deduction is $400. The charity is required to give you a written disclosure of the benefit’s value for any quid pro quo contribution over $75.¹¹

Penalties for Overvaluing Property

The IRS treats inflated non-cash deductions as a priority audit area. If the value you claim is 150% or more of the correct value, the substantial valuation misstatement penalty is 20% of the resulting tax underpayment. If your claim hits 400% or more of the correct value, or the correct value is zero, the penalty doubles to 40% as a gross valuation misstatement.¹² Those penalties are on top of the additional tax and interest.

A reasonable cause defense exists for the 20% penalty, but only if you both relied on a qualified appraisal from a qualified appraiser and made a good-faith independent investigation of the value. For the 40% gross misstatement penalty, no reasonable cause defense is available.¹³ A legitimate appraisal is not just a filing formality. It is your primary defense if the IRS challenges the number.

Year-End Timing

A donation counts for the tax year in which you irrevocably give up control. For tangible property, that is the date of physical delivery. For a properly endorsed stock certificate mailed to the charity, the mailing date controls, but if you hand the certificate to your broker or the issuing company for reregistration, the gift is not complete until the transfer posts on the company’s books.¹

Electronic stock transfers through a brokerage are complete on the date the shares actually land in the charity’s account. Initiating the transfer on December 30 will not save the year if the shares arrive January 2. Start well before year-end. For checks, the postmark date controls, but the USPS applies machine postmarks at regional centers, not neighborhood mailboxes, so December 31 in the slot does not guarantee December 31 on the envelope. If the year matters, get a hand-stamped postmark at the counter or use certified mail.

1
Internal Revenue Service. Publication 526 (2025), Charitable Contributions
2
eCFR. 26 CFR 1.170A-7 Contributions Not in Trust of Partial Interests in Property
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property
5
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
6
Internal Revenue Service. IRS Guidance Explains Rules for Vehicle Donations
7
Internal Revenue Service. About Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes
8
Internal Revenue Service. Charitable Contributions – Written Acknowledgments
9
Internal Revenue Service. Instructions for Form 8283 (Rev. December 2025)
10
Internal Revenue Service. Guidance Regarding Appraisal Requirements for Noncash Charitable Contributions
11
Internal Revenue Service. Charitable Organizations – Substantiation and Disclosure Requirements
12
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
13
Office of the Law Revision Counsel. 26 USC 6664 – Definitions and Special Rules