Did you know that, under certain circumstances, you can claim a tax deduction for purchasing Canadian works of art?
Whether they are individuals in business, partnerships, corporations or trusts, taxpayers who acquire an eligible work of art can claim an annual capital cost allowance equal to 20% of the amount paid for federal purposes and 33 1/3% of the amount paid for Quebec purposes.
Eligible works of art
Eligible works of art are:
- Prints, etchings, drawings, paintings, sculptures and other similar works of art whose cost is not less than $200;
- Hand-woven tapestry or carpets, or handmade appliqués, whose cost is not less than $215 per square metre;
- Engravings, lithographs, wood engravings, or maps made before 1900;
- Antique furniture or any other antique object, produced more than 100 years before it was acquired and whose cost is not less than $1,000.
- The work of art must have been created by an artist who was a Canadian citizen or permanent resident at the time it was created;
- The work of art must have been acquired from a person with whom the purchaser was dealing at arm’s length;
- The work of art must have been acquired solely for the purpose of generating business income, for example, to decorate the reception area, a conference room, hallway or a shareholder’s office, and be visible to the enterprise’s clients.
Note that taxpayers cannot bring the works of art to their personal residence, unless they have an office where they receive customers, which could be the case, for example, of self-employed individuals, such as consultants, accountants, lawyers, etc.
In the future, taxpayers who sell an eligible work of art that subsequently appreciates in value, must pay tax on the taxable capital gain and, as necessary, add the recapture of the capital cost allowance claimed over the years to the their business income.
As an individual who owns works of art, you are not eligible to claime a capital cost allowance. However, there may be tax implications when you sell such works of art. It is advisable to retain information on the purchase date and price.
Lastly, taxpayers also have the option to donate works of art to charitable organizations and obtain a charitable contribution credit.
Do not hesitate to contact us if you have any questions regarding the owning works of art as part your business activities, or for all other inquiries.
Our experts will be happy to provide you with sound advice regarding your tax situation. They can help you avoid costly mistakes and give you the benefit of their knowledge to optimize your business’s tax situation.
This article was last updated on February 9, 2021.