But before you do, at least consider the other resources your company could use to lend a helping hand – not the least of which are your company's products and services.

Donations of products and services are popular among small business owners, primarily because they allow the business to take advantage of benefits that are not available to their cash counterparts. Yet product donations (or gifts-in-kind) also require a bit of special handling to maximize their benefit. Here are the answers you'll need to successfully navigate in-kind contributions for your company.

Why donate products & services?

From the outset, it's important to make sure that you are donating because you have a sincere desire to help other people. However, many entrepreneurs have discovered that donations of products and services can also be a smart business decision.

Here's how it works: Suppose your restaurant finds itself with an overabundance of certain ingredients. Rather than disposing of the excess at a total loss to the business, you choose to donate it to a local food cupboard. Although you won't recover the full value of the ingredients, you can recover some of the cost as a charitable deduction on your tax return. The same principle could be used to partially recover the expense of a salaried employee during a slowdown – provided they are actually donating services your company typically sells to its clients.

Are there any non-tax benefits of in-kind donations?

With the right approach, you can use in-kind donations as a tool for increasing your company's visibility in the community. Think about the impact you could make if your company's products (and logos) were pasted all over the community's biggest annual charity event. You would gain not only advertising exposure, but also a reputation as a concerned and vital pillar of the local community. If your company provides services instead of goods, you can deck your service providers out in company apparel to achieve a similar effect.

How should in-kind donations be valued for tax purposes?

A number of business owners labor under the misconception that the receiving charity will value their in-kind donation for them. In reality, nonprofits meticulously avoid assigning value to non-cash contributions, and instead provide the donor with a letter describing the goods or services that were received. In other words, you will be responsible for valuing your own in-kind contributions.

Generally speaking, the IRS will allow you to deduct the FMV of any donated products or services. That means that the amount of your deduction will likely exceed your cash investment in the product. However, certain circumstances (e.g. capital gains) could limit the amount of your in-kind charitable deductions, so as a rule you should consult a qualified tax preparer before claiming your deduction.