Avoiding IRS Art Donation Audits Requires An Up‑Front Checklist

Art may be in the eye of the beholder, but art valuation for tax purposes is in the eye of the IRS.

Improper deductions based on inflated art valuations are now in the agency's crosshairs, part of an ongoing expansion of audit and investigations into charitable deductions for art donations.

But taxpayers need not be deterred from making charitable donations of art. Instead, they should prepare to defend large art donation deductions.

Learn how the charity will use the art. Taxpayers should be aware that permissible deduction amounts for art donations depend on whether the charity uses the donated artwork to further its tax-exempt purpose.

If so, they generally may deduct the fair market value of the artwork as of the donation date with some exceptions, such as art donated by the artist and gifts of art owned by the donor for less than one year.