Artwork is not a deductible business expense ... even for artists.

Hi June,

I'm an oil painter who is being audited by the IRS. They are refusing to allow my deduction of oil paintings I have purchased from galleries. I have receipts for all of these purchases and have provided them to the IRS. I am deducting them because I believe they are necessary for my business. These are artists whose work I admire and learn from. From these paintings I can see how they solved similar problems. I can also use these paintings as examples when I teach. One of these painting is from my teacher's teacher who is deceased and this is the only way I can learn from him.

What do you think? Should I be able to deduct this from my business? I make my living as a painter, and I feel this should be valid. I'd appreciate any comments you have and if you know of a precedent for this?

Thank you so much for your time.

Cheri from Sandi Park, NM


Dear Cheri,

The IRS thinking is that art treasures and antiques do not depreciate in value and so you may not deduct their cost as a business expense.

There is ambiguity about something such as an antique desk used in your office or a musician's rare banjo. If they are used and subject to wear and tear they may be depreciated. That is not the IRS regulation however. It is from a tax court case only and so could be rejected in an audit.

I spoke with the IRS about this last week and the response from that particular IRS employee was: Yes, you may deduct the cost of the oil painting if it is part of the ordinary and necessary costs of the business. Therefore as long as the IRS has accepted that you are a self-employed artist seeking to make a profit you may deduct the costs of artwork as teaching tools. His opinion is not the one generally accepted by the IRS!

My experience has been that the IRS will not allow the deduction. I know of no precedent to the contrary on oil paintings or sculptures.

Of course what would make sense is to treat artwork like houses and other buildings. Deduct the cost and pay tax on the gain when it is sold.

Wish I had better news for you.

Best,
June