Capital Gains or Income Tax: An Artful Choice
Capital gains tax is applicable to the sale of artworks, provided that more than a year has passed between the purchase and resale. If less than a year, income gained on the sale is subject to normal income tax, which can reach 39.6%, depending on annual income. If a work is sold more than a year after its purchase, sellers can choose either to pay capital gains tax on the income from that sale or to class it along with their other income and pay the appropriate percentage depending on their tax bracket. For almost any high-income individual (depending on their marital status and living situation) the more sensible financial choice is to opt for the capital gains rate of up to 28%. Call us if you have questions about the rules governing art donations, 614-338-2365.