How to Tax the Sale of Art as an Investment or a Collectible
Although works of art often represent sound investments, for tax purposes they are treated as collectibles when sold. Selling art one year or less after purchase is reported as a short-term capital gain. However, when art is sold more than one year after acquisition, calculating the tax might require the distinctive worksheet for collectibles. To determine if this is the case, some steps are taken to measure overall gains from selling both art and other assets.
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Things You'll Need
- Internal Revenue Service Schedule D
- Gains and losses on all capital assets sold in the same year as the art
- Purchase date of art
- Sale date of art
- Purchase price of art
- Sale price of art
- Commission for selling the art
- Instructions for Form 1040
Instructions
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1
Complete a line on Schedule D for each asset sold in the same year as the work of art.
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2
Enter a description of the artwork sold more than one year after purchase in Column (a) of Schedule D, Part II.
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Record the purchase date of the art in Column (b).
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Place the sale date of the art in Column (c).
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State the purchase price of the art in Column (d).
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Subtract any commission for selling the art from the sale price. Place the result in Column (e) for sale proceeds.
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Total the long-term capital gains and loss from all assets sold – not just artwork. If an overall long-term gain exists, subtract any short-term loss. A total long-term gain that is not offset by short-term losses requires completion of the “28% Rate Gain Worksheet” on page D-8 of the instructions for Form 1040. No special tax treatment for artwork sales is required when incurring either a long-term loss or a combined loss of both long- and short-term sales.
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Tips & Warnings
All capital gains and losses from collectibles are totaled on the “28% Rate Gain Worksheet.” Subtracted from this figures are long-term loss carryover from prior years and current year short-term loss. This reduces the taxable gain on art works by capital losses. The Schedule D Tax Worksheet uses the result along with other figures to apply various tax rates depending upon the types of income.
