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Art Collecting Strategies 

The Benefits of Buying: Canadian Art is Tax Deductible (When Buying for Your Office)

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Art can do more than transform a blank, ordinary wall. Not only does it enhance your environment, but in recent years it has also become one of the most popular types of investment. Art collectors now frequently purchase works to diversify their investment portfolio, as attested by the art market grossing over $67 billion in 2018, according to The Art Basel and UBS Global Market Report. In light of such staggering numbers, the Canadian government has recently implemented tax incentives to promote the purchase of original Canadian works of art. An individual or organization may quality for an annual tax deduction provided certain criteria are met. For qualifying artwork, this amount is normally equal to a 20% declining deduction. 

Photograph by Melissa Van Gogh.

Photograph by Melissa Van Gogh.

The Canada Revenue Agency (CRA) has established that taxpayers who purchase or rent Canadian artworks, either for their personal office or for the common areas of their places of business (such as the lobby or hallway) can claim a tax deduction for the cost of purchasing or renting the work. Since buying art is regarded as an amortization expense for companies and business owners, taxpayers may deduct an amount from the business income if the artwork is not a personal expense but instead was acquired for the sole purpose of earning income. At the federal level, taxpayers can amortize 20% of the purchase cost annually, but in the first year of the purchase the half-rate rule applies. The amortization will therefore only represent 10%.

Under the Tax Act, this purchase must meet the following criteria:

  1. A print, etching, drawing, painting, sculpture, or other similar work of art that is greater than $200 in value
  2. Made by a Canadian artist at the time the art was created, whether a Canadian citizen or a permanent resident
  3. Antique furniture, or any other antique object, produced more than 100 years before the date it was acquired, the cost of which was not less than $1,000
  4. Exhibited in a place of business where it will be seen by clients 
Decorate your office with original artwork and you may receive an annual tax deduction. Photograph by Jud Mackrill.

Decorate your office with original artwork and you may receive an annual tax deduction. Photograph by Jud Mackrill.

If you own a business there are some great tax benefits to collecting Canadian Art. While some businesses rent artwork to avoid the capital outlay required to purchase it, many take advantage of the capital cost allowance (CCA) to build their own private collection. For a better understanding of how to claim the CCA for original Canadian art, visit: https://cascadeaccounting.ca/2019/11/25/investing-in-canadian-art-a-tax-perspective/

Re-visit the YKLM Blog section to discover more Object Spotlights & Art Collecting Strategies.

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Written by Catherine Lacroix

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