The Internal Revenue Code provides taxpayers with a charitable contribution deduction for all donations of art work that have an ascertainable value. To qualify, you must donate the art to a qualified organization. Donations to most non-profit organizations that promote religious, educational, literary, scientific, charitable or humanitarian causes will qualify you for the deduction.
Valuing the Art
Though subject to other limitations, the deductible amount of your donation is equal to its fair market value on the date you contribute it. If the value of your artwork is $5,000 or less, it is permissible for you to conduct your own valuation for purposes of calculating the deduction. In assessing the value, you must consider the condition of the piece and the price you can reasonably obtain in the open market. If you fail to conduct due diligence or intentionally inflate the value by 150 percent or more, the IRS may impose penalties on the excessive amount. For artwork that is worth more than $5,000, the IRS requires you to obtain a qualified appraisal.
If you claim a deduction for $20,000 or more, you must attach a copy of the signed appraisal and a clear photograph of the artwork to your tax return. The same requirements apply to artwork you value at $50,000 or more; however, to minimize the risk of interest and penalties on an improper valuation, you may request the IRS to ascertain the art’s value. Obtaining the statement requires you to complete Form 8283 and submit a copy of the appraisal with a $2,500 user fee.
Reporting the Deduction
The deduction for a charitable contribution of art work is only available to taxpayers eligible to itemize deductions. You are eligible to itemize if you incur sufficient deductible expenses that exceed the standard deduction amount. Electing to itemize requires you to report all expenses, including the charitable deduction, on the Schedule A attachment to your personal income tax return. The maximum charitable donation you can claim in a year is equal to 30 percent of your adjusted gross income. However, the IRS increases the limitation to 50 percent for those donations you make to a “50-percent-limit organization.” The IRS publishes a list of all organizations that qualify for the higher limitation.
Capital Gain Property
If you own the piece of art for more than one year and it has appreciated in value, the IRS treats the asset as having inherent long-term capital gain. Donations you make that have inherent capital gain are subject to deduction limitations. If you make the donation to a “50-percent-limit organization” you must reduce the deduction by the amount of inherent capital gain. Essentially, this limits your deduction to the original purchase price of the art. However, you can deduct the full fair market value of the artwork if you limit the deduction of all capital gain property you donate during the year to 30 percent of your adjusted gross income. Excessive amounts you are unable to deduct in the current year are deductible in any of the five future tax years.
Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.