If you're a Pablo Picasso, and your work has sold for millions, and you donate a work to charity, you may only donate the cost of the canvas and oils. Sad, but true.
For years, a bill has been percolating on Capitol Hill whereby an artist could donate their work, and take a deduction up to the full appraised value of their work. Manners of appraising are different. You could have an individual certified appraiser determine the value, or you could produce historical sales figures to justify the value. A year ago, the Senate passed a bill that would give artists this right - (see http://www.collegeart.org/advocacy/000253/) yet this measure did not make it into law.
To read a history about what the folks at the College Art Association have done, visit this link, and our friends at the Graphic Artists Guild provide some interesting historical background on this link, reminding us that "...before 1969 artists, composers and writers (artists) could donate self-generated works to a non-profit institution and receive a fair-market-value deduction. Subsequent to 1969, as part of broad tax reform, they could deduct only the cost of materials."
The Charitable Giving Issue Center, writes, in part "...bill would allow artists to deduct the fair market value of a donation of tangible work that they have created. Living writers, musicians, artists and scholars who donate their work to a charitable cause would earn a tax deduction based on full fair market value. Currently such work receives only a deduction based on the cost of materials unless it is donated posthumously by the estates. The new provision, which has been long supported by arts organizations, would serve the public interest in spurring the donation of art to collecting and educational organizations that use art in their charitable mission. It would also address the inequity of current law with respect to artists vis a vis other donors."
Americans for the Arts, on January 12th outlined their arts agenda in the new Congress, which includes "Enacting legislation allowing artists to claim a fair market value tax deduction when they donate their work to charities for use rather than resale. The Senate has approved this provision five times in the past four years, but the House has yet to follow suit."
So, in the meantime, what's an artist to do? Well, there is one organzation that claims to have an answer, but I don't know a whole lot about them. They state that "The only legal way around this is an artist's relatives may take off the retail value of the works if they donate the artists' works. Artists themselves may exchange works with other artists and each donate the others works for the full retail value. In both cases you must have: (1) IRS recognized museum; (2) formal written appraisal; (3) the appraiser supply you with the IRS required forms." For more information on them, check out the Artist-Museum Partnership Act and find out of you can make this work-around viable.
However, with this continued effort, it will eventually become law. until then, good luck. Oh, and don't bother the "get paid then donate" route, it's simply a wash and there is no real tax benefit. I can see a time where I could significantly reduce my taxable income -- legitimately -- by donating fair-market-value services and final imagery to worthy non-profits, but I am not holding my breath.
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