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Tax benefits every Fine Art Collector should know

According to Larry’s List, painting is one of the most popular media found in collections. About 83% of all media are paintings; the rest are collages, drawings, or works on paper. If you’re an art collector, these are some of the details you should know. Knowing all the taxes linked to art in the United States is also important. Here are some lesser know tax secrets for you to keep in mind.

Sales and use tax for art ranges from 0–8.875% in the United States

Use tax, which is the term used for value-added tax (VAT) in art imports, and sales tax are state-dependent. State-dependent means you’ll be charged differently depending on where you are. For instance, in the states of Montana, Oregon, Delaware, and New Hampshire, you don’t have to pay any sales tax. If you’re an art lover in New York City, you’re required to pay 8.875% sales tax, which is the highest amount of sales tax in the United States.

Income Tax or Capital Gains

Capital gains refer to the tax paid on income obtained from the sale of art when its value has risen since you purchased it. This tax applies to all artworks across the United States if there’s a period of more than a year between when art was purchased and when it was sold. If you sell the art within the same year, then you’ll only be required to pay the normal income tax. This amount can be 39.6%, depending on annual income. When dealing with art being sold a year after it was purchased, you’re given a choice between capital gains and income tax. Capital gains tax is generally the more sensible option, as you only get to pay around 28%.

Art patrons are eligible for deductions

There are several laws in place in the United States to encourage patronage of the arts. For instance, there are tax deductions for organizations and individuals who donate art pieces and cultural goods to non-profits and foundations. The tax deductions for such donations range between 20% and 50% of the value of the donation. On the other hand, donations to cultural institutions result in deductions of 30%. To find out more about tax deductions for art, you can sit with a fine art asset management specialist. They’ll explain all the opportunities available.

These are some of the art tax secrets you may need to know when selling or buying art. Are you interested in learning more about art and taxation in the United States? Get in touch with our fine art asset management team today at A.A. Fine Art. We would love to hear from you.

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