Maximizing Tax Advantages for Art Owners: Strategies for Financial Advisors and Clients
Art is not only a beautiful form of expression but also a potential tax advantage for its owners. From charitable donations to trust planning, there are various strategies that financial advisors can use to help their clients maximize the benefits of owning art.
Roshan Weeramantry, a partner at Helium Advisors, emphasizes the importance of including art in the financial planning process. By making incremental donations over time, clients can reduce their tax burden and potentially lower their federal tax rate. Additionally, the value of these donations can offset capital gains from other investments or income from retirement accounts.
Allen Laufer of Silvercrest Asset Management Group suggests utilizing a charitable remainder trust for the sale of artwork. This strategy allows owners to defer capital gains tax on the sale of art while reinvesting the proceeds and receiving a tax deduction based on the value that will ultimately pass to charity.
While capital gains avoidance is a common concern for art investors, the use of debt to finance art purchases can provide further tax deferral. The stepped-up basis upon the death of the owner also allows heirs to avoid capital gains taxes on the appreciation of the asset.
However, it’s important for advisors and clients to consider the potential changes in estate tax exemptions and the expiration of certain tax provisions. With the elimination of like-kind exchanges for art, other tools like stock portfolio loss harvesting become even more crucial for offsetting capital gains.
Ultimately, whether a client is a collector or an investor in art can impact the tax benefits they can receive. By demonstrating a profit motive and maintaining thorough records of purchases and expenses, clients can maximize the tax advantages of owning art.
In conclusion, art not only adds beauty to our lives but also offers unique tax advantages for its owners. By working with a financial advisor to develop a comprehensive plan that includes art, clients can minimize their tax burden and maximize the benefits of their investments in this asset class.
