Donating Art to Charity for Tax Deduction on Charitable Contribution

Can you take a tax deduction for donating a piece of art that you won to a charity?

Generally, a charitable contribution of a work of art is subject to reduction if the charity’s use of the work of art is unrelated to the purpose or function that is the basis for its qualification as a tax-exempt organization. The reduction equals the amount of capital gain you would have realized had you sold the property instead of giving it to charity.

Most of the time, if you are not donating the piece of art to an art museum or similar place, you will have to reduce the amount of charitable deduction that you may take on the piece of art.

 

Donating Art to Charity for Tax Deduction on Charitable Contribution

The IRS is very strict about reporting rules in this area of charitable contributions because there is currently many instances of fraud occurring when people donate art to charity. For example, when you donate a piece of art, if you claim a deduction of $250 or more, you must get and keep an acknowledgement of the contribution from the donee organization. This illustrates that it is always a good idea to keep excellent records when making a large donation or claiming any deductions with the IRS.

 

Donating Art to Charity Valued More Than $500

Next, if you claim a deduction in excess of $500, you generally must maintain written records that include information about the donee:

  • a description of the donated property;
  • the fair market value at the time of contribution, the method of determining it and a copy of the signed appraisal, if any
  • a description of how and when you acquired the propert
  • and the cost or other basis of the property.

If the art is valued at over $500, the taxpayer must complete section A of Form 8283 and attach it to your tax return. This requires more work and increases the chance for an audit on the charitable contribution of art work.

 

Donating Art to Charity Valued More than $5,000

As the value of the art increases, so do the compliance hurdles associated with taking a charitable tax deduction on the value of the donated art. Where the claimed value of the property exceeds $5,000, you must have a qualified appraisal of the property. This means an appraisal done by a qualified appraisal not earlier than 60 days before the contribution date and that meets numerous other requirements. You include information about these donations on section B of Form 8283, which you file with your tax return.

 

Donating Art to Charity Valued More than $20,000

When the art is valued at $20,000 or more, you must attach a complete copy of the signed appraisal. If an item of art is valued at $20,000 or more, IRS may request that you provide a photograph. If an item of art has been appraised at $50,000 or more, you can ask IRS to issue a “Statement of Value” which can be used to substantiate the value.

Remember, that in addition to the special IRS rules related to donated art, the normal charitable deduction rules and limits still apply in these circumstances.  A charitable deduction may be limited to 20%, 30% or 50% of your contribution base or an even lesser amount. This base, which usually is your adjusted gross income, varies depending on the type of organization involved and whether or not the deduction of the work of art had to be reduced because of the unrelated use rule explained above. The amount not deductible on account of a ceiling may be deductible in a later year under carryover rules.

 

IRS Art Appraisal Services for Charitable Donations

All taxpayer cases selected for examination that include an item of art with a claimed value of $50,000 or more must be referred to Art Appraisal Services for possible review by the Commissioner’s Art Advisory Panel (See IRM 4.48.2 and IRM 8.18.1.3). Please review thephotographic requirements for referrals, and also our preferred individual appraisal item format(PDF) for works of art valued at over $50,000.

For general inquiries, contact Director, Art Appraisal Services at 202-317-8975.

Internal Revenue Service/Art Appraisal Services
1111 Constitution Ave., Suite 700
C:AP:SO:ART
Washington, DC 20004
ATT: AAS