Scam Alert! Art Donation Deductions
Audio version available here:
Length: approx. 1 min. 30 sec.
If you are a high-income earner, there is a possibility you may be targeted for a scam advertising tax savings through art donation deductions. While art donations are valid for tax deduction purposes, there is a scheme being promoted by scammers which the IRS has deemed abusive.
This scheme can include buying pieces of art at low prices, waiting a year to donate them, and then claiming deductions at a much higher value than what was originally paid. The abusiveness of this scheme is in buying artwork that has little to no market value and getting an appraisal that inaccurately inflates it. Those who fall for this scheme and end up claiming the deduction could trigger an IRS red flag and audit. Consequences of these audits could result in heavy penalties and interest.
There is a way to properly claim art donations without falling to abusive schemes by promoters. First, keep detailed documentation of the name and address of the charitable organization that received the art, the date and location of the contribution, and a detailed description of the donated art. Then, ensure you have the correct tax forms and appraisals based on the value of the artwork. The requirements for art pieces valued at $250 or more, more than $500 but less than $5,000, more than $5,000, and more than $20,000 can be found here.
If you are thinking of taking advantage of the art donation deduction, we encourage you to work with a tax professional who can ensure your deduction is valid. If you do not have one, reach out to us at XQ CPA! We would love to help you.
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