27 Jul I’m an artist. What can I deduct for my donated paintings?

Q. I’m an artist. I donate pieces to a major charity. As intended, they auction them off. What do I put on my federal income tax return?
— Artist

A. To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution.

Fair market value is defined in business law as the price that a willing buyer and a willing seller would agree on, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

Neither the buyer nor the seller should be under any pressure to buy or sell, he said.

If your art was going to be put on display at the charity, then you would have to get an appraisal of the artwork to back up the fair market value, he said.

In your case, the charity sells your artwork at auction. This means that one or more willing buyers bid up the price they are willing to pay for your art, he said.

“There is no better example of fair market value than when someone steps up and buys your art,” he said. “This is similar to when you donate a used car to a charity. The charity sells your donated car and then lets you know how much it sold for.”

However, under Internal Revenue Code Section 170(e)(1), the IRS considers what you are donating to be a “self-created work,” Kiely said.

“If an artist contributes a `self-created work’ they can only deduct the cost of paint and canvas,” he said. “The American Society of Appraisers is a leading supporter of legislation to eliminate this penalty to artists.”

So unfortunately, your charitable contribution of a self-created painting is limited to canvas and paint, he said.

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This story was originally published on July 27, 2021.

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