I am thinking about making a charitable donation of a work of art so that I can get a deduction on my federal taxes. What do I need to know first?
IRS Publication 561 has all of the information you need to know about making a charitable donation. You can see it here.
To summarize, the first thing you’ll need to know is if the organization to which you are donating the art is one that qualifies to receive deductible contribution. These organizations are listed in IRS Publication 526, which you can view here. You can search for a particular organization here.
After that, you need to make sure the artwork has a related use at this institution. For example, the IRS won’t allow a deduction for a Chinese scroll painting that you have donated to the Baseball Hall of Fame, but you can get a deduction for that Norman Rockwell painting that you donate to the National Museum of American Illustration.
I’d really like to get $X deduction on my taxes. Can you make that happen?
No. My opinion is not for sale.
What are the numbers I need to know?
If the work of art is worth less than $5,000, you do not need an appraisal.
If the work of art you are donating has a fair market value of $5,000 or more, you will need to hire a professional appraiser to write an appraisal report and keep it in your tax files in case the IRS asks for it.
If the art has a fair market value of $20,000 or more, you will need to send a copy of that appraisal to the IRS with your federal tax return.
If the donation has a fair market value of $50,000 or more, the Art Panel, a group of 25 art professionals who are volunteers, will review your appraisal for the IRS.
What is “fair market value”?
Read about that here.
When do I need to get an appraisal for a charitable donation?
An appraisal must be completed within 60 days of the gift in order to get a deduction on your taxes.
What happens if the IRS believes I have taken too large of a deduction from my tax return for the donation?
If the IRS decides that you have taken too much of a deduction from your federal income taxes for the art donation, they will send you a bill for what you owe and fine you. They also will fine the appraiser and ban him or her for 3 years from preparing appraisals that go to the IRS.
Now you can see why it is important to get an objective, disinterested opinion of value from a reputable appraiser!
I am an artist and want to give my work to a museum. Can I get a deduction on my federal taxes?
If you created the art that you are donating, you only are allowed to deduct the cost of the materials you used to create the work of art from your taxes. The IRS will not allow you to deduct the fair market value of that work of art.