Art Donation Appreciation
If you donate artwork that’s appreciated significantly, make sure you get the highest deduction available. You must clear a number of hurdles before you can write off the full market value of the contribution.
Let’s say you bought a painting for $4,000 a few years ago that’s now valued at $10,000. Donating the painting can generate a $10,000 deduction, which could save you up to $3,860 in federal income tax, depending on your tax bracket. State and local tax deductions may increase your savings.
However, to earn the full deduction, you must meet these tests:
- The donated art must have been yours for more than a year
- The art must be donated to a public charity or nonprofit group, not to a private foundation
- The art must be appraised by a qualified, unrelated party
- The “related use” rules must be satisfied. These rules prevent you from deducting the full amount if you donate artwork to a local charity and the organization turns around and sells it.
To pass the “related use” test and earn the $10,000 write-off, donate the painting to an art museum displaying that type of work or to a university that uses such paintings in art history courses.