deductions

How the New Tax Cuts and Jobs Act Impacts the Art World

(graphic Hrag Vartanian/Hyperallergic, original image via  Credit Score Blog )

(graphic Hrag Vartanian/Hyperallergic, original image via Credit Score Blog)

Under the new tax laws, the wealthiest will have even more incentive to make charitable donations, while the average middle class family will have less.

The tax law changes passed in 2017, officially the Tax Cuts and Jobs Act (TCJA), represent the largest change to the tax code in 30 years. With so many changes, Hyperallergic wants to address — in this and future articles — how the legislation will affect the art world.

One area in particular that impacts almost everyone in the art world — from artists, to collectors and patrons, to cultural institutions — is charitable giving.

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Your Miami Tax Guide: Yes, You Can Deduct That Pina Colada

After a few weeks diligently absorbing the dark, awful post-election news, I’m ready to turn my attention to fun, sun, and travel deductions for the Miami art fairs.

To review the basics, if you’re a professional artist with a profit motive, you’re reporting your income each year on a Schedule C (as part of your 1040 form), and the beauty in that is that it entitles you to list your income and your expenses. So as a self-employed person, you are paying taxes on the difference between those numbers (aka your “profit,” which is income – expenses), and not on the gross income you receive.

Travel expenses incurred in your arts business are one of the great deductions that you are allowed. A note of caution before you go expensing a bunch of luxury accommodations though: by law, your business expenses must be “ordinary and necessary” to qualify. This means that if the industry standard is a Motel 6, and you book the Ritz-Carlton, you may deduct only the Motel 6 amount. Further, travel expenses are a tempting area for tax abuse (along with meals and entertainment and home studios). If yours are out of proportion with the size of your business, or compared to your peers, you have an excellent chance of being audited.

Warnings aside, travel deductions are a great benefit, and here is how to make the most of them, in time for the Miami art fairs.

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