Charity auction portrait donations and taxes

[Garth Herrick]

I am interested in the ways artists can use donated portrait services to their advantage at tax time. I have donated to two high-end charity auctions last year, as well as two others this year. However, although the fair market value of my donations this past year were significant, I see they have very little effect on my taxes. There is good publicity and exposure, and possibly other commissions from this, but for tax purposes it seems like a waste of time and resources. For these months of effort, if I had stayed with only paying commissions, I would have come out in better financial health.

Does anyone have thoughts and experiences to the best ways to utilize donated art when reporting of taxes?

Thanks.

[Chris Saper]

Unfortunately the Artist-Museum Partnership Act, aka Artists Fair Market Valuation Bill failed to pass the House this past season. No guesses on whether or when it might resurface.

Also unfortunately, your client who purchases a painting from you for $5K and then donates it will receive his maximum allowable deduction.

Don't even get me started on this.

The only way to deal with this, I think, is to donate a gift certificate for a partial credit toward a commission, of for a less costly commission (eg charcoal portrait) that has yet to be done, where there is an opportunity for you to realize the balance/ upgrade outside the auction constraints.

[Cynthia Daniel]

I guess this gets into "our hours of work are not worth anything." It's the same with web design. For example, if I do a web site for someone and they refuse to pay me at the end, I cannot write that off as a loss. If I host a web site and the client doesn't pay me, I can't write that off as a loss either, even though it's essentially the same as rent.

One year when things were slow around Xmas, I decided to do a web site for the Portrait Society of Atlanta at no charge. I knew they needed one and that they could not afford to pay someone. I had to get a statement from them saying I donated a web site in order for it to be deductible. I couldn't deduct the value of my hours. The whole thing is ridiculous and illogical.

[Geary Wootten]

OH......DON'T "EVEN".........!!!!!!

This has been a bone of contention with me for eons, even in the sign business.

("Quotation" Alert!)

Bottom line is.....the "powers that be" do NOT really care for Artists ......."all things considered"........ Until of course it's time to honor themselves by getting us contracted to reproduce their selfish mugs in their "ivory towers" on their "hallowed halls."



Forgive my rant if this is not the ideal spot for this kind of venting.

-Gear

[Linda Brandon]

Originally Posted by Geary Wootten

Forgive my rant if this is not the ideal spot for this kind of venting.

-Gear

Rant away! I'm with you!

Garth,

The way I've been handling auctions lately is to auction off a two hour head and shoulders charcoal portrait sitting from life in my studio. I'm very specific about the "studio","two hour" and the "from life" part. This works for me because I really like working from life and I get a victim for whom I don't have to pay an hourly fee. I don't have to travel, do a photo shoot or torture myself with composition questions. I love getting to know people this way - I have had some amazing conversations.

I've discovered there's a world of difference between a hired professional artist model and a "real person"; that is, real people usually don't sit as well. This is especially true if the victim is a child.(Some artists use television as a distraction but I'm resisting this.)

The best case scenario is that people show up in my studio, see the oils hanging around, say to themselves "Hmmm... why not an oil painting?" In this case I give them a discount toward the price of an oil portrait instead of doing the charcoal portrait, although, come to think of it, I always try to do a charcoal head from life during a commission anyway.

The worst case scenario is that people don't bother to collect on the certificate, which can also happen.

By the way, I'm in contact with a lot of people who run local charities and I'm always amazed that NOBODY is aware of these horrendous tax laws which affect artists so adversely.

[Stanka Kordic]

Well, talk about rants...don't get me started...but started I have. I had one nightmare situation where the same family bid on my donations at 2 different auctions, one for each child. The horror!

The good part was they ended up having 4 children...

You are so right Linda about how absolutely CLUELESS the committees are about the tax laws!

However, despite my often dicey situations, auctions have provided my business the necessary kick start when I began to focus on portraiture. Now, I just offer pencil sketches to charities.

Wishing you all the best,

Stanka

[Debra Jones]

I have had the best marketing results with the donation/demo. When I donate a $200 small portrait or equal value TOWARD a larger piece, not only have I had my bread cast upon the water come back doubled as in a $650 piece hence the $450 income, but the charity has seemed to always get full market value for the donation. Just two weeks ago, I was auctioned with a "buy it now for 120%" and they got $240 for me! The buyer whispered he was upgrading and had even explained the subject (taboo: pet) had been painted a couple of times before by high end painters but had not captured what he saw in the eyes of his animal. My demo on the spot (of a human and his jet, not a puppy, by the way) showing my technique and process as well as a few pieces worked wonders.

I have stopped papering the donation market, as the tax benefit is a scam. I have donated to charities I believe in and found some karmic boon from the experience.

Final thought.

If you have a patron pursuing you for a donation, explain the tax problem and tell them they can buy a sample piece FROM you which they may donate. Or, I suppose, the gift certificate which will net them the tax break and you the business.

I kind of believe in the charity part of it so I never regret the loss of business. Only if nobody redeems it. I would be painting SOMETHING anyway, why not help a cause?
dj*

[Michele Rushworth]

Stanka wrote:

...auctions have provided my business the necessary kick start when I began to focus on portraiture.

Same here!

My tax accountant has advised me that I may deduct the donations at fair market value as "advertising expense" (not as charitable donations, due to the above mentioned tax laws). That is how I have handled these donations for the past two tax years.

[Garth Herrick]

Originally Posted by Michele Rushworth

My tax accountant has advised me that I may deduct the donations at fair market value as "advertising expense" (not as charitable donations, due to the above mentioned tax laws). That is how I have handled these donations for the past two tax years.

Thanks Michele!

That is very useful to know. I wish I thought of that before e-filing several days ago. Maybe in this case one should send a revised tax form with the advertising expense changes.

[Joan Breckwoldt]

I suppose there is no logical answer to this question but I'll ask it anyway. I have yet to donate a portrait at an auction though I did sign up to donate a painting (of some kind) at our church's upcoming auction (in September so I've got some time). It'll be great exposure, tax advantage or not. And apparently there's NOT from reading the previous posts.

Here is my question, if someone donates a charcoal drawing for $200, doesn't the artist then get to write off the $200? Especially if the true market value is proven by someone paying $200? And if the artist donates a large oil portrait that would normally sell for $5000 (hypothetically speaking!), why, in heaven's name wouldn't the artist be able to deduct the $5000? I'm going to donate some other items (not art related) so it'll be interesting to see who sets those prices, I was planning on filling out the value myself, just like when I drop off things at Goodwill and the local church resale shop. I used to volunteer at the resale shop and the DONOR would fill in their own values. Doesn't make a lot of sense to me . . .

We even had someone bring in an oil painting to the resale shop and put the value of their donation at $2000. This caused a problem since the painting was something from a garage sale. (Not that you can't find great things at garage sales, my point is that it was a nothing painting and the donor did this as a tax scam.) I'm off the subject now.

I suppose next year our tax accountant can explain all this. And Michele, what a clever tax accountant you have. I will remember your tip.

Joan