Last month, I wrote about how the tax legislation handed in 2017 - formally the Tax Cuts and Jobs Act (TCJA) - will quickly carry big modifications to charitable giving. Based mostly on reader feedback, I now need to handle a longstanding follow regarding charitable giving within the art world that wants to finish. I’ve written on this subject before for Artwork F City, but the practice continues in the art world, and it bears revisiting. This practice usually begins with a dialog: director of non-revenue X asks artist Y to donate an artwork for an upcoming fundraiser (or generally its a for-profit organization soliciting work for a charity fundraiser). Artist Y is hesitant - he’s been requested for work from five different organizations within the final month. The arts organization director makes a obscure mention of tax deductions, and so the artist agrees to donate a small painting. A couple of months after the profit, the artist opens a letter from the group, saying thanks for the donated work, and listing its sale value.
With this seemingly official letter in hand, it’s easy for the artist to conclude that they can deduct that gross sales worth on their taxes. However this is inaccurate. Here’s why: when an artist makes work, the IRS considers that work to be a "self-created asset." The artist can take a deduction just for the price of materials, not the labor. But for many artists, the value of the work derives primarily from the labor that they put into it. Picture a chunk by artist El Anatsui, whose shimmering chainmail-like tapestries are painstakingly stitched together out of bottle caps. The materials by themselves are nugatory -it’s the labor that turns them into art. Regardless of that, underneath the current tax code, if El Anatsui used 30,000 discovered objects plus $10 of fasteners, and spent 1,000 hours of labor creating a piece, he’d get to deduct just $10 for donating that piece. It gets worse. If you’re a professional artist (as opposed to a hobbyist), you function an arts enterprise. C ontent has been generat ed with the help of G SA C ontent Generator Dem oversion.
Because of this on the same tax type the place you list your art earnings (that’s your Schedule C), you also get to listing your bills. This is nice, as a result of it means you’re only paying taxes on your revenue - not in your total revenue. The IRS doesn't enable "double-dipping," however. So if you’ve deducted the materials as soon as as an art expense on your tax return, you may not then deduct them again as a charitable expense. In other phrases, earlier than you ever donated the piece, you already had all the deduction you have been going to get for it. When you donate work to the charity, it's possible you'll assist a company do good work, chances are you'll get the warm fuzzies, it's possible you'll get a point out on the brochure, but you do not get any tax deduction. I’m each an artist and an accountant, so I’ve been on each sides of this situation - I’ve donated numerous artwork to art advantages, and i additionally do the taxes of many artists who donate artwork and infrequently feel cheated after they learn that their donation offers them no benefit on their taxes despite what felt like a promise (or a minimum of a suggestion) from the organization to which they donated. Non-earnings, I feel for you. You need funds, and there are adjustments in the tax law this 12 months which are going to seriously harm your bottom line (see my final article). But can we all agree to finish the practice of soliciting artwork with promises - or even recommendations - of tax deductions? It’s unfair and deceptive. And we know you’re better than that. Artists are typically generous, electronic and need that can assist you do good. So I’m calling on you to keep your solicitations centered in your good work and the way the artist’s donation will enable you do more of it. DISCLAIMER: True tax advice is a two-way dialog, and your accountant needs to listen to your full situation to apply the foundations appropriately in your case. This submit is meant for normal data only. Please don’t act on this alone.
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