Things To Consider When Donating Appreciated Artwork

If you happen to be charitably inclined and also you collect art, appreciated artwork may be one of the best charitable donations from a tax deduction perspective. When donating appreciated property, it is doubly beneficial because you are able to enjoy a nice tax deduction while avoiding the capital gains taxes you would usually owe if you sold the property instead. The extra benefit from donating artwork specifically comes from the fact that the top long-term capital gains rate for art and other types of “collectibles” is 28%, as opposed to 20% for most other types of appreciated property.

What Is Appreciated artwork exactly?

Essentially, it is collected or inherited art that is held for more than one year and has appreciated in value. This qualifies it as a “collectible” under the Internal Revenue Code and is considered a capital asset. Whenever a capital asset is sold, the owner will owe a capital gains tax. The amount of the capital gains tax is based on the difference between the artwork's current fair market value and the owner’s cost basis. If the owner decides to donate appreciated artwork to a charity, such as the Giving Center, long before a sale takes place, the collector can potentially negate any capital gains tax that would be incurred in a sale.

Charitably minded art collectors can receive tax benefits when they donate art to an IRS accredited charity. Consider Giving Center, a 501(c)(3) charity that can provide collectors with the ability to:

• Potentially eliminate capital gains tax on the sale of the art;
• Take a same-year tax deduction;
• Time their donation for charitable support during their lifetime;
• Minimize estate tax implications

Requirements

Be aware that most artwork donations will require an appraisal by a qualified appraiser. The Internal Revenue Service (IRS) has a set of rules that contain very detailed requirements about the qualifications an appraiser has to possess and the contents of an appraisal.

IRS auditors will be required to refer all donations of art valued at $20,000 or more to the IRS Art Advisory Panel. The panel’s findings are the IRS’s official position on the value of the art, so it is very important to provide a qualified appraisal to support your valuation.

Plan Carefully

With careful planning, the contribution of collectible artwork to charity can provide support for a donor’s charity of choice and charitable causes, ensuring that charities receive the most proceeds possible.

For individuals who inherent collectible artwork, the cost basis is stepped up to the fair market value as of the date of the previous owner’s death. If the artwork is donated right after inheritance, the cost basis might be the same as the fair market value on the date of donation. Inherited capital gain property is considered a long-term gain asset regardless of the holding period.

Help the community

Your charitable art donation will have a huge impact on people’s lives, countless causes need the support of donors. Your generous donation will be able to transmit emotions such as joy, relief, and happiness to those who are in need. Any piece of artwork or even an entire collection that you donate to a well-deserving charity, such as Giving Center, helps.

Giving Center’s dedicated team has years of combined experience in accepting and utilizing all types of collectibles: antiques, celebrity memorabilia, classic cars, coins, comic books, jewelry, and much more.

Visit the Giving Center to learn more about how you can make a difference.