Rules of Deduction: Fine Art and Other Non-Cash Donations

March 24, 2015

Fine art can be a valuable donation for a nonprofit. Whether it is used as part of a gala auction or will be sold for cash to benefit the organization’s mission, it is important to understand the rules surrounding tax deductions and appraisals. Which responsibilities fall on the exempt organization and which are solely the concern of the donor?

In order to claim a tax deduction for a non-cash donation like art, donors must come up with a value for that deduction. If the value of the deduction exceeds $5,000, the IRS requires a qualified appraisal of the donated item, which should be initiated by the donor. In order to claim total deductions of over $500 for non-cash contributions, taxpayers must also file Form 8283 with their personal income taxes.

The organization receiving the donation are required to provide a written acknowledgement of items received from the donor, but not the value of those items. The exception to this rule is a scenario whereby the donation is part contribution and part receipt of benefit (e.g., a gala where the donor contributed something but received a benefit in return, such as dinner, entertainment, etc.). In that case, the organization would have to acknowledge what was paid, and the value of what was received in return.

Ultimately, the IRS is not interested in an organization’s unqualified opinion on the value of fine art or other noncash items, so it is imperative that donors initiate a professional appraisal in order to get the full deduction value they are due.

Got questions? Connect with an experienced Aprio Tax Exempt and Nonprofit CPA advisor today. 
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