Best Practices for Nonprofits Charging Fees for Services

Nonprofits are mission-driven organizations - but that doesn’t mean they can’t (or shouldn’t) generate revenue. In fact, charging fees for services can be an essential part of sustaining your nonprofit’s work. When done strategically and within IRS guidelines, earned income helps nonprofits diversify funding, reduce dependency on grants and donations, and expand their impact.

Here’s what you need to know about charging fees as a nonprofit - and how to do it right.

Yes! The IRS allows 501(c)(3) public charities to charge reasonable fees for goods or services - as long as those activities align with the organization’s exempt purpose (your mission). In other words, if you're advancing your mission by providing the service, charging a fee for it is typically allowed.

Common examples include:

These are all examples of mission-related earned income.

Not all income is created equal in the IRS’s eyes.

Mission-related income is generated from activities that directly further your nonprofit’s purpose. This type of income is not subject to unrelated business income tax (UBIT).

Unrelated business income (UBI), on the other hand, is income from activities that are not substantially related to your mission, even if the revenue supports your programs. UBI may be taxed, and too much of it can even risk your tax-exempt status.

Example:

Tip: If you’re earning revenue from anything that feels outside your core mission, consult a qualified nonprofit accountant or attorney - or reach out to us for a referral.

To stay compliant and ethical - and to support your mission - follow these tips when charging fees:

Always make sure the service you're offering aligns with your stated charitable purpose. The stronger the connection, the safer you are from tax complications.

Communicate clearly about what’s included in the fee, why you're charging it, and how it supports your mission. Transparency builds trust with your community and funders.

Consider offering:

This maintains accessibility and reflects your commitment to equity and inclusion.

Use good bookkeeping practices to track earned income apart from donations and grants. This helps with IRS reporting, budgeting, and understanding your sustainability model.

InstantNonprofit clients can find helpful resources on basic nonprofit bookkeeping in our Help Center.

Make sure your fees are set at fair market value and not designed to benefit specific individuals (such as board members or insiders). Avoid any arrangement that could be seen as self-dealing.

If you're engaging in significant fee-for-service activity that doesn’t directly serve your mission, you may trigger UBIT. A little taxable income won’t jeopardize your 501(c)(3) - but ongoing unrelated activity might.

If you're charging for services, share how those funds are used to support your work. People are often more willing to pay when they understand that the fees help expand access, fund scholarships, or fuel bigger outcomes.

Charging for services can be a powerful tool for your nonprofit - but it’s important to do it right. If you’re unsure whether a revenue-generating idea is mission-aligned, or want to avoid IRS scrutiny, we’re here to help.

Autopilot members can join our weekly Air Support office hours with experts to get personalized feedback on earned income strategies, IRS compliance, and more.

Not a member yet? Learn more about our Autopilot compliance program to get support year-round.

Nonprofits can and should charge for services when:

Done well, earned income can help you grow your impact, support your community, and stay sustainable for years to come.