How to Report Art Gains on a Schedule D
The sale of artwork and other valuables requires a tax filing.
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If you've sold a valuable work of art or a collectible, the Internal Revenue Service wants to hear about it on your tax returns. The agency levies federal capital gains tax on asset sales of any kind, whether it's stocks, bonds, real estate or "collectibles," a category that includes stamps, coins, antiques and fine art. It's critical to keep accurate records of your sale and your original purchase.
Get Form 1040, Form 8949 and Schedule D (Capital Gains and Losses), from the Internal Revenue Service. You can request the forms by calling the IRS help line at 800-829-1040, or download them directly from the IRS.gov website. You can fill out the forms online and print them out, or print out blank copies to use.
Step 2Complete Form 8949 if you purchased the artwork for investment. Enter a description of the property, the date acquired, the purchase price (the basis), the date sold and proceeds of the sale. Add any broker's fees or auction fees you paid to the purchase price you report; subtract these charges from the proceeds. You report short-term gains on art that you owned for less than a year on Line 1 and long-term gains (held for more than a year) on Line 3. Carry these amounts over to the appropriate lines on Schedule D, and attach any additional copies of Form 8949 that you need.
Step 3Fill in your name and Social Security number at the top of Schedule D. Enter the short-term and long-term gains or losses from Form 8949 on Line 7 or Line 15, respectively. Use Schedule D alone if your art was not an investment asset. Short-term gains are taxed at your personal income tax rate, whatever that may be. Long-term gains in art and collectibles are taxed at 28 percent.
Step 4Add lines 7 and 15 and enter the result on Line 16, at the top of the reverse side of Schedule D. If you have a gain, go to Line 17 and follow the instructions. On Line 18, enter the amount from the 28 percent rate gain worksheet, if any. If Line 16 is a loss, skip down to Line 21. Enter the smaller of this loss or $3,000 on Line 21. Carry the results over to Line 13 of Form 1040.
References
Tips
- Use Form 4684, Section A, if you have suffered a theft loss or damage to your artwork. You can deduct the net loss on Schedule A of Form 1040; you must itemize deductions to do this.
- Use Form 6252 if you sell the artwork on installments; use Form 8824 if you've exchanged the artwork for another asset or property rather than cash.
- If you inherited the artwork, the basis for the transaction is the fair market value of the art at the time you inherited it. If you received the art as a gift, the basis is the original price paid by the person who made the gift.
Warnings
- If you have a net loss on the sale of art, and the loss is deductible, you are limited to a deduction of $3,000 from your adjusted gross income. You may carry over that loss to a maximum of $3,000 in the following year.
Writer Bio
Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.