Tax Incentives for Buying Canadian Art
Were you aware that purchasing original Canadian art is tax-deductible in Canada? Owning Canadian art is not only a way to beautify your space but has also become a popular investment choice.
The Canadian government has put in place appealing tax incentives to encourage the purchase of original Canadian artwork. The Canada Revenue Agency (CRA) allows taxpayers who buy or rent Canadian artwork for their personal office or business areas like lobbies or hallways to claim a tax deduction for the cost of the purchase or rental.
Acquiring artwork, including paintings, etchings, sculptures, drawings, and photographs, is considered a capital expense for businesses or individuals. An individual or organization may be eligible for an annual tax deduction if they meet certain criteria.
As a business owner, you may benefit from tax advantages when you collect Canadian art. To qualify under the Tax Act, the artwork must meet the following criteria:
The artwork must be created by a Canadian artist and relate to the business's commercial activities, displayed in a place of business visible to clients.
The artwork must be a print, etching, drawing, painting, sculpture, or similar work of art with a value exceeding $200.
The artwork must have been created by a Canadian artist at the time of its creation, whether a Canadian citizen or permanent resident.
If the buyer is registered for GST and QST, they can recover the taxes paid when purchasing the artwork by claiming input tax credits. Rental expenses are also deductible if made for business purposes.
If the purchase meets these criteria, the buyer can claim a declining deduction of 33% of the artwork's cost (class 8.1) at the provincial level and 20% (class 8) at the federal level.
However, some works of art do not qualify for a tax credit, such as those with a value of less than $200 or created before the 1900s, over 100 years ago.
We highly recommend consulting with a Chartered Professional Accountant to determine whether your purchase qualifies for a deduction.