Contractor and Self-employed?
© 2009 - 2020
par Louis Julien , Artiste peintre
BUY WORKS OF ART MAY BE BENEFICIAL FOR YOU benefiting , if eligible, a deduction for depreciation on the acquisition of Canadian art .
You can fully amortize the purchase of a work of art .
Two criteria are fundamental to enjoy a depreciation on the purchase of a work of art . The purchase was made in order to earn income relating to the business : that is to say :
the work will be exhibited in the premises of the company for customers to identify a brand image of the company. Moreover ;
the work was done by a Canadian artist.
If these two criteria are met, the annual deduction equal to 20 % of the value of the work at the federal level and 33.3 % of the value of the work in Quebec. You can subsequently sell the work or make a donation.
If a gift is made to a Québec museum (museum in Quebec or accredited museum by the Minister of Culture and Communications), an increase of 25 % of the value of the work will be added to the amount eligible for donation and , for Québec tax.
In addition, if the property that is the subject of the gift of cultural property qualifies (must meet criteria of national interest and importance and be recognized as such ) and that the gift is made to an institution recognized , no capital gain will be realized during the donation.
This type of gift requires a certificate from the Canadian Review of Cultural Property Export and Commission of Cultural Property in Quebec Commission.
Exemples : A company or an independent contractor buys a work by a Canadian artist to hang in an office at the sight of customers. The cost of the work is $ 5,000 .The amortization of the work will be at 20 % per year for federal tax at the rate of 33.3 % for Québec income tax.
In the event of resale, after fully amortized work at both levels of government, tax recovery will be the amount of the original cost of the work and the difference between the resale price will be considered as capital gain. If the work is purchased $ 5,000 five years later sold at a price of $ 8,000 , the $ 5,000 will be amortized reported as recaptured depreciation ( 100% included in computing income) and $ 3,000 difference as a capital gain ( less than 50% in the calculation of income).
If the same work is given a Québec museum , instead of being sold, the $ 5,000 amortized will also be a recapture of depreciation ( 100% included in computing income) and 3 $ 000 difference a capital gain ( less than 50% in the calculation of income).
For cons , the donor is entitled to a receipt for tax purposes of $ 8,000 federal and $ 10,000 in Quebec.
Moreover, it should be noted that if the gift is described as "cultural " and was made the subject of a certificate , any capital gain would be included for the donor.
Other specific texts relating to the purchase , resale and donation of works of art in relation to tax.
Source: Association of Contemporary Art Galleries (AGAC )
Did you know that for your business taxes , you can enjoy some incentives for the purchase of works of art? Just go to ARC to see more information.