Visual artists can donate their own work to charity and get a donation receipt; but the tax advantages are minimal when the transaction is handled properly. In some cases it can actually cost you money to report the transaction at all.
When an artist donates their work to a registered charity, the charity can issue a donation receipt and sometimes the amount is significant. This is called a gift-in-kind. The artist can then apply the donation to reduce taxes in the normal way.
But what often gets forgotten is that at the same time you claim the donation, you have to declare income in the same amount. Even though no actual cash changed hands, from CRA’s perspective the transaction is equivalent to you selling the artwork and then donating the money back to charity.
The result is that the in-kind charitable donation has little or no impact: income rises by X, and is more or less cancelled out by a donation of X. Net result: $0.
Let’s say you create a work of art whose fair market value (FMV) is $1,000. You donate it to a registered charity and they give you a receipt for $1,000.
You must declare the painting as sold for $1,000, then claim a charitable donation of $1,000.
This fact may not be intuitively obvious, that you have to declare income. But let’s look at it another way. Say you make a donation of $1,000 in cash to charity. You claim the charitable donation and get a tax credit. But remember that the $1,000 originally came out of your pocket; you earned it at some point in the past, so it was already declared on a tax return as income. Income in, donation out.
So donating your own art is fundamentally the same as donating cash, and has the same tax impact in the end: income comes in, and is later cancelled out by a donation. The only difference here is that when you donate a gift-in-kind, income is deemed to have been generated at the same time that the donation was made.
One warning: if your net income (after expenses) is above $85,000, the tax triggered by the deemed sale
will be higher than the tax saved by applying the charitable donation receipt. Since no money actually changed hands, you can go ahead and ignore the transaction on your tax return to avoid paying the difference.