There are many good reasons to buy fine art. You may be a collector, you may want to fill up that wall space on your latest interior design project. Perhaps, you are thinking as an investor and a potential profit; you might be thinking about your estate or passing down an inheritance to others. Regardless of the reason for buying art, you may want to know about how fine art is taxed. Knowing a few strategies concerning fine art and taxes can help you minimize the impact of taxation on your wallet. Here, I will briefly note a few ways to manage the art that you buy, so that you may minimize taxes on the art that you own. I am not an accountant, this is not legal advice and I am not responsible for any damages you may incur. This article is brief, for a more thorough explaination, consult the works cited.
Tax laws on fine art are complicated. Artwork falls under the category of “collectibles”, concerning the law, and there is a complex netting process to decide who owes how much tax on piece of art. Here are a few strategies you can think about if you are considering buying a piece of art.
- -Structure the sale of a piece of art to recognize gain over multiple years. Do this instead of buying it all in once. Sell your art in installments rather than a lump sum at a single period of time.
- – Consider donating your art to a qualified charity. This only works if you are holding the collectible for more than one year.
- -Sell your losses. Art can be Short term and long-term capital assets that have unrealized losses.
- -Take the gains you make off your investment in art and reinvest it into a qualified opportunity fund, under that tax cuts and Jobs Act.
- – Consider gifting your artwork if it is part of your estate. gifting a piece of art or a collectible removes the artwork from your estate, and therefore it is no longer subject to a death tax.
Works Cited:
How Collectibles Are Taxed (investopedia.com)