art tax write offs for your business
Did you know if you own a business, there are some amazing tax benefits to collecting Canadian Art?
This includes all kinds of Canadian Artwork; paintings, sculptures, drawings, photographs, etc - qualifying for a tax deduction as long as certain criteria are met. According to the CRA website, the Canadian Tax allows business owners to purchase and write-off Original Canadian Art in its entirety. This is included in the “Capital Cost Allowance” as long as the Artist was a Canadian Citizen when creating the work and the artwork is an original worth a MINIMUM of $200.
Before I go into details I should legally say - make sure you follow up with a chartered professional accountant regardng the specifics of your purchase to determine if it will qualify for deduction. That being said - here’s how it works!
Artwork valued at less than $200 is a one-time class 12 deduction at 100% of the purchase price. Artwork valued at greater than $200 can be claimed at 100% of purchase price as a class 8 capital cost allowance depreciable at a rate of 20% per year. Artwork valued at greater than $200 can be claimed at 100% of purchase price as a class 8 capital cost allowance depreciable at a rate of 20% per year.
Example: If a painting is $10,000, the amount that can be claimed each tax year is: Year 1 - 20% of $10,000 can be claimed as a deduction = $2000 Year 2 - 20% of $8000 (the remaining value from year 1) =$1600 etc.
Other key criteria is less about what kind of business you are and more how you will use the art purchase.
The art is on display at the place of business, and improves employee morale, creativity, dialogue, etc.
The art is on display at the place of business, and communicates the businesses sophistication, taste, style, professionalism, etc. to clients or customers.
The art purchase is directly relevant to business activities, e.g. an art print to decorate a construction hoarding wall, a commissioned painting of the business headquarters or founder, etc.
The following reasons are NOT likely to be considered valid justifications to classify an art purchase as a business expense.
The art was considered as profitable inventory which could be resold in the short-term due to the rising price and status of the artists. The profits would be re-invested in the business.
The CEO of the business loves the artist and intends to hold on to the artwork for an extended period, but it is being kept out of sight, in storage, or at the CEOs home where no business activities are occurring.
If this isn’t a reason to support your fellow Canadian artists, I don’t know what is!