Office Artwork and Antiques: Can You Deduct These as Business Expenses?
Artwork can't be deducted; antiques can sometimes. Find out why.
If you purchase expensive artwork or antiques to brighten up your office and impress your clients, can you deduct the cost from your taxes as a business expense? Answer: Artwork: No, Antiques: Maybe.
Artwork -- like paintings and sculpture -- does not qualify for a depreciation deduction because it does not wear out or get used up over time through its regular, active, and physical use in a business. This is one of the principal requirements to take a depreciation deduction. (To learn more about depreciation deductions, see Nolo's article on Section 179.)
Thus, for example, a medical practice that purchased over 70 works of art to display at its offices, including paintings, sculpture, pottery and batik prints, was not allowed to depreciate the cost. (Associated Obstetricians and Gynecologists, P.C. v. Comm'r, 762 F.2d 38 (1985).) Similarly, Harrah’s Club in Reno, Nevada, was not permitted to take depreciation deductions for its collection of 94 vintage automobiles. Noting that the vehicles were kept in a humidity-controlled environment and needed remarkably little repair or maintenance beyond occasional mending of a crack in a wood part, both the IRS and the tax court held that the cars were not depreciable because they didn’t wear out or become obsolete.
Things may be different, however, if you purchase an antique such as an antique desk, clock, rug, bookcase, cabinet, chair, table, or car and physically use it in your business. In two cases, the Federal Appeals Court has held that professional musicians who used 300-year-old violin and bass viol in their business as musicians for the Philadelphia Orchestra could depreciate them as business assets. These assets qualify for depreciation when they are:
- physically used in the normal course of business,
- subject to wear and tear, exhaustion, or obsolescence, and
- are used for more than one year.
The IRS didn't like the outcome of these cases and didn't agree with them and would attack taxpayers who attempted to depreciate antiques. However, this appears to have been bluster: Since 1997 when these cases were decided, the IRS has never questioned such deductions.
So long as you actually use an antique in your business, it should be depreciable. For example, you could depreciate an antique desk you use in your office. But you can't depreciate an antique you keep as a collectible, not to use in your business. For example, you can't depreciate an antique car you keep stored in a garage and don't actually drive for your business.
If an antique you use in your business qualifies, you may depreciate the cost over several years or deduct all or most of the cost in a single year using Section 179 first-year expensing. If you already own antiques that you use in your business, but failed to depreciate, you may claimed the deductions you overlooked by filing IRS Form 3115.
To find out what other business expenses you can deduct and more, see Nolo's Small Business Tax Bundle.