I annoyed the majority of a business of art class yesterday with my question to a CPA about what an artist can claim on taxes for a piece of work donated to a non-profit to auction for fundraising. It has always been stated that the artist may only claim the cost of materials (and apparently that is still true) but recently a reputable and successful gallery owner informed me that it was legal to claim the amount the piece auctioned for, in much the same way you would claim the auction amount of a car you donate to a non-profit. Having donated several cars in this manner -i n one case to “the blind” which generated a lot of humorous responses — this seemed reasonable to me, so I asked the CPA. Not only did he dismiss it, he also told me I could not claim the donation to the blind for the car in the manner I described. Having done so twice, with a CPA doing my taxes, I knew he was wrong, so I persisted with the art donation clarification. Let me say right here, that the wonderful taxman has made it impossible to donate cars, boats and planes for their Blue Book Value any more, but you can still claim the money the item generated for the non-profit. Which brings us back to art.
Artists get asked pretty frequently to donate work to help raise funds for everything from art-related non-profits to Boys and Girls Clubs. I think a lot of folks believe that art just “appears” like magic dust and that the artist simply stands by and observes the process. They clearly do not grasp the level of labor involved. So asking for a painting seems like a no-brainer. “Got a spare painting you can give us so we can auction it off to save the porcupine?”
I am a full-time artist. This is my job. I have a studio in a gallery which is open to the public 5 days a week. I work in my studio between 5 and 7 hours a day, usually 5 days a week, sometimes more. I also volunteer with arts organizations, participate on committees for arts shows and am involved with a group of abstract artists who create a number of large collaborative pieces every year to raise money for organizations of our choice. I am also a fairly prolific painter, and in the years I have been painting, I have given away dozens of paintings, probably close to a hundred. In the beginning, I didn’t even keep track of them, much less claim them on my income tax. But when I became a full-time artist with a business license and itemized deductions and an eye to making my own work more valuable to my collectors, I started being more judicious with my donations _- and that includes making sure that the paintings I donate reflect the quality of my work, rather than something that has been sitting at the back of a stack, unsold, for a year.
If none of this is important to you, you will already be bored and have stopped reading. But if you do any of these things, let me tell you how it works out. Apparently artists and museums have been trying to change the tax deduction on donated works since 2008, with no success. Artists want to be able to claim more of a deduction for a donation which involves hours, days, weeks or months of effort and talent; museums and non-profits want artists to be able to do so, so that they can obtain more, and better quality, art in this manner. No dice.
The sticking point seems to be “fair market value” — which is what sets art apart from cars, boats and planes. The value I put on a painting needs to be verifiable. Artists should be able to do this by showing a history of sales. But what about an emerging artist? There seems to have been talk of establishing some sort of impartial jury to review works, but that was deemed too unwieldy. So why not keep it simple and let us claim the amount for which it was auctioned? Not consistent, apparently, since we all know auctions are not reliable indicators of the real value of our work. (Sometimes pieces go for 3 times their usual retail price, due to the excitement of a bidding war. Other times they might go for a third their value on a silent auction table.)
So for now, until the powers that be who rule the tax world can come up with a solution, we are stuck with being limited to deducting only the cost of materials. And everyone loses. Fewer and fewer high quality pieces get donated in this economy because we are working too hard making a living to let go of a piece of blood, sweat and tears for the price of stretcher bars, canvas and paint. We’d rather hang on to it, in hopes that someone will fall hopelessly in love and buy it from us, for real money. And serious artists know better than to give away the second-rate piece, lest it sully their reputations; better to paint over it and put the materials to better use.
Add to this quandry the pain of seeing your painting bid up to three times your price at an auction when you haven’t sold a painting out of your studio for three months.
The CPA’s answer was that we should be donating anyway, out of sheer altruism. Easy for him to say. Altruism was a lot easier when there were two working adults in my household. It’s a little tougher when we’re trying to make a go of it on my “international art star” status, which as international as it is, isn’t in the “art star” category yet.
I will still donate art to a select group of non-profit groups I believe in. They will get smaller pieces, specifically created for their auctions. The random solicitors will be graciously declined, and may or may not get my tax speech. And on those rare occasions when they offer the artists some portion of the final bid, they’ll get a big showy piece!