Properly Claim an Art Deduction
If you are an art lover and you are interested in donating art to charity, you can claim a tax deduction for your donation. For tax purposes, you will need to keep track of the following details:
- the name and address of the charity that received the artwork,
- when (date) and where (location) you made the donation,
- a detailed description of the artwork you donated.
There are different requirements for substantiation depending on the value of the art donated. If your donation is worth:
- $250 or more, you need a written acknowledgement from the charity,
- more than $500 but not over $5,000, you also need to complete a Form 8283, Section A, and attach it to your tax return,
- more than $5,000, you need to complete Form 8283, Section B; this form requires signatures from a qualified appraiser and the charity; you also need to get a written appraisal of the donated art,
- 20,000 or more, you need to do all of the above and attach a copy of the appraisal to your return; you should also have a high-resolution photo or digital image of the art and be ready to provide it to the IRS, if asked.
You can legitimately claim art donations, but you should be aware of some dishonest promoters. They encourage people, especially high-income taxpayers, to buy pieces of art, donate it later, and then falsely deduct an inflated donation amount. The IRS is actively investigating such promoters and it is auditing taxpayers to prevent these kinds of art donation scams.
How These Scams Work?
Promoters encourage art loving people to buy different kinds of art, often at a lower price. This cost might also cover extra services from the promoter, like storing, shipping, and managing the art’s appraisal and donation. The promoters assure that the art’s actual value is a lot higher than what they’re selling it for.
These scams encourage buyers to donate artwork after owning it for at least a year and to claim a tax deduction based on a higher market value than what they originally paid for the art. The scammers may advise you to donate art every year and they may suggest you to buy a certain quantity of art in order to have a guaranteed tax deduction of a specific amount. They might even coordinate with certain charities to accept these art donations.
You should be careful when buying many pieces of art from the same artist, especially if these artworks don’t have much value outside of what the seller is advertising.
Also, be cautious if the sellers recommend specific appraisers for you to use. Appraisers supporting this art donation scheme often don’t provide enough details about the artwork. They might not consider important factors like rarity, age, quality, condition, the artist’s reputation, the price paid, and the number of artworks bought.
If you are approached by one of these scams promoters, you can report the scam on Form 14242, Report Suspected Abusive Tax Promotions or Preparers.
The IRS has a group of experts in Art Appraisal Services who can help you obtain a proper valuation of your donated art, if your item has a value of $50,000 or more. You will be charged a user fee for each request. You can find more information about how to make this request by clicking here.
In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.
This material is for informational purposes only. It does not constitute tax, legal or accounting advice.