Surely, You Want to Donate Your Artwork to Charity! Don't You?

"Brothers." Block Print. Copyright 2010. Anne M. Hier.

Every year I get dozens of requests asking me to donate artwork to various charitable groups or organization fundraisers. There are plenty of worthy causes out there and a lot of them relate to animals. But, if you have decided to paint for a living, you must limit how much of your time and art you give away for free.

If you have properly set yourself up in business, it is presumed that you take appropriate legal deductions to offset and reduce the amount of tax paid each year. But, here's the problem. If I create an artwork and sell if for $400, my client can hold that painting for 18 months and then donate it to a charity and receive a full Fair Market Value (FMV) deduction of $400. ( Let's face it, for most of us, our niche work isn't going to radically appreciate in value over a year and a half. Therefore, in most cases, the FMV will be the purchase price. Additionally, this sale is well below the $5,000 threshold that would require an independent appraisal for FMV).

But, what happens if I donate my artwork directly to the same charity? I donate the artwork to the charity. That's it. Oh sure, I can take a tax deduction for the cost basis of the artwork, but NOT for my hourly rate for labor, my overhead, or for the full FMV. Thus, for a 5” x 7” colored pencil drawing that I would sell for $75, my cost basis is the rock bottom cost of the materials and the sales tax. But wait, I have to pro rate that. If I buy a pad of paper for $9.99 and it contains fifty 12” x 12” sheets, that means I can get two hundred 5” x 7” pieces of paper to work on. In other words, the cost basis of the $75 finished artwork is only .049 cents, plus a few extra cents thrown in for the pencils I use. This is not worth my time and trouble to list as a deduction on my tax forms.

Is this fair? Well, while plenty of artist's groups don't think so, not allowing the self-selected deduction by artists makes sense. Believe me, if I could donate my artwork for FMV I would be painting my fingers off to deduct my way to a zero tax bracket.

So, what do you do when charities come with hat in hand asking for a donation of artwork? Here is what I do:

1. I tell them I limit my art donations to those breed organizations with which I am actively involved (Bulldogs and French Bulldogs).
2. I offer to list several drawings or paintings of the requested breed online for sale at a discount to the organization's members. These members can then purchase the art at a discount, donate it to their cause, and know that it will probably bring more at auction than the price they paid for it. (After all, it is their charity – not mine).
   
   

There are other ways to handle such requests. Many artists donate a portion of the proceeds of all their sales to named charities and this method forestalls endless requests for donated art to other groups. However you choose to donate to charitable groups, make sure it is on your terms and that you know how you will handle any requests for your time and talent in advance.

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