There are myriad tax issues that come into play for art collectors. This article delves into some of the basics of the tax implications of collecting art, as well as some general guidelines on like-kind exchanges and insurance, all of which the prudent collector should be aware as he or she builds an art collection.
Amassing an art collection, especially one that a collector hopes will increase in value, requires expenditures that, depending on the category of the taxpayer, may result in deductible expenses. If the taxpayer is attempting to gather a collection as an investment and take full advantage of applicable deductions, knowledge of the relevant definitions of these categories is essential. For tax purposes, there are three categories of taxpayers that collect artwork. Depending on the particular category the taxpayer falls into, various expenses related to acquiring the art collection may be deductible.
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