Most people erroneously assume artists take significant tax deductions for donating art to non-profit organizations (schools, museums, social services, etc.) featuring art as the enticement for generating donations from others. The tax deduction is limited to the cost of materials used to make art and not the retail value of the art. For example, if a painting has a retail value of $1200 and cost $100 in materials, the artist can claim a $100. The artist’s expertise and time is completely left out.
In the typical fundraising with art scenario, after art sells the organization gets money, the buyer gets art and the artist gets exposure. This exposure is similar to advertising, yet at some point artists must buy more materials, pay the electric bill and other items like any small business. The public generally does not perceive artists as small business owners. Most artists donate their work for important causes even when doing so results in little or no personal gain. Other types of business benefit when making donations in ways that are not attainable to artists. There is a BETTER WAY to conduct auction fund-raisers using art.
An equitable arrangement has supporters of the organization buy art directly from the artist at a discounted price that still allows the artist to sustain a studio. The art purchaser then donates it to the organization they are supporting. The donor who bought the art from the artist takes a more significant tax deduction that what the artist can. Finally, the organization includes the donated art in an auction to raise funds.
This scenario still relies on artists talents to raise money for an organization. Now the benefits are more evenly distributed between the organization, supporters of the organization and the artist.
Please use this information when planning fund-raising events that rely on art donations.