Did you know that the purchase of original art in Canada is tax-deductible!?
Not only art does enhance your environment, but in recent years it has also become one of the most popular types of investment.
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. 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%.
If the purchase meets the CRA's criteria, buying artwork is considered as an amortization expense for corporations or individuals who operate a business. The cost can be deducted over a period of several years as a capital cost allowance. Talk to your accountant! Also, if the buyer is a GST registrant, they can recover the taxes paid at the time of purchasing the artwork by claiming input tax credits.
To qualify, artwork must:
✨A print, etching, drawing, painting, sculpture, or other similar work of art that is greater than $200 in value
✨Not be held for resale or otherwise included in the inventory and exhibited in a place of business where it will be seen by clients
✨Be acquired to gain or produce income from an arm’s length individual
✨Be created by someone who was Canadian at the time (whether a Canadian citizen or a permanent resident).
Some works of art are, however, excluded and do not qualify for a tax credit, more specifically works having a value of less than $200 or created prior to the 1900s – created over 100 years ago.
If the buyer is a GST registrant, they can recover the taxes paid at the time of purchasing the artwork by claiming input tax credits.
Rental of artwork
The CRA was also asked about whether the cost of renting artwork for display in the office was deductible. The CRA confirmed that a taxpayer can deduct the cost of renting the art as long as the expense was made for business purposes.
🇨🇦 Buying Canadian artwork is good for your bottom line and will help your business stand out with your customers. Now is the perfect time to invest in something that makes your business more beautiful. As an added benefit, you will be helping to support artists right here in our great country.
We strongly encourage you to reach out to a Chartered Professional Accountant regarding the specifics of your purchase to determine if it will qualify for a deduction.