Donate Art, Save Taxes

Donate Art to Charity and Potentially Deduct More Than Your Cost Basis

It might be several weeks yet till the 2007 tax year filing deadline in mid-April, but if you intend to donate art to charity and claim a deduction for charitable giving, you only have a few days left to act. Your art donation must be made by the end of the calendar year, so act now!

This is a charitable donation that can help not only the beneficiary charity, but yourself too. The actual cost basis of the artwork has no relationship to your deduction; you can deduct the fair market value of the artwork that you donate to and IRS-approved charity.

So if you bought the artwork some time ago and it has appreciated in value, you get to deduct the appreciated value from your taxable income, not what you paid for it (your cost basis).

Or if you can acquire art at a cost that is less than the appraised fair market value (FMV), then you can deduct more than you are out of pocket.

One significant catch that you need to be aware of, however, is that you must have owned the artwork for a minimum of 12 months to qualify for the deduction.

Continue reading for more detail concerning the charitable donation of art ...

Tax Deduction for Fine Art Donations to Charity

It's December and you need to make charitable contributions before the end of the year to be able to deduct them against income on your 2007 tax return.

Don't forget that the 1995 Tax Act allows you to donate artwork to any IRS-approved charity at its fair market value, not at its cost basis.

In addition, this deduction falls outside of the alternative minimum tax clawback if you fall within the AMT.

Read our article on all the rules surrounding the deduction of charitable donations of art.

Tax Help: Filing Deadline for 2006 Tax Returns is April 17, 2007

I hear we have a couple of extra days to procrastinate this year on getting our 2006 tax returns in which normally would be due on April 15, 2007. However, the IRS has announced that 2006 tax returns may be filed or paid by Tuesday, April 17, 2007 because Monday, April 16 is a legal holiday in the District of Columbia.

According to the IRS, filing and payment deadlines that fall on a Saturday, Sunday, or legal holidays are on time if they are met by the next business day. This year, April 15 falls on a Sunday, making the extended due date Monday, April 16. However, the IRS recently became aware that under newly enacted local legislation, April 16 is Emancipation Day, a holiday in the District of Columbia. Although not a federal holiday, it is observed in the District of Columbia and therefore is a holiday under the timely filing/payment rule. This extends the nationwide deadline an additional day, to April 17.

The IRS said the April 17 deadline will apply to actions including:

• 2006 federal individual income tax returns, whether filed electronically or on paper
• Requests for an automatic six-month tax-filing extension 2006 balance due payments
• Tax-year 2006 contributions to a Roth or traditional IRA

Emancipation Day marks the April 16, 1862, signing by Abraham Lincoln of the Compensated Emancipation Act, which freed slaves in the District of Columbia. It is not a federal holiday, and IRS offices will be open.

Don't forget to take your deduction for charitable donations of art. If you don't qualify this year, this is something you might consider planning for so that you qualify for the deduction in future tax years. One of the key provisions is that you must have owned the artwork in question for a minimum of 12 months, so you need to plan ahead. We have a tax help article detailing all the provisions necessary to qualify for the deduction of charitable donations of art.

Here's to more holidays around April 15th!

Tax Deduction for Donating Art

Is it really tax season again already! Well, believe it or not, there is a tax write-off available for donations of art. The IRS rules require that you have owned the artwork for a minimum of 12 months and that the artwork is donated to an IRS-approved charity. The amount you can deduct on your tax return for a charitable donation of art is the appraised fair market value (FMV) of the artwork. My article gives all the tax help you need to take this deduction and also explains what to do now so that you can claim this write off next year if it’s not available to you for last year. The way to maximize this tax write-off is to buy art at less than fair market value whenever you can, hold it for a year, and then donate it to the charity of your choice and take the full fair market value for the year in which you make the donation. Effectively if you are lucky enough to be able to buy works at below market value, you will get a deduction for an amount greater than what you paid out in cash.