For anyone expecting a big return on the signed print they bought online, know that a mere one percent of all artists generates more than half of all artworks sold globally. While there is no way to ascertain the next big thing in art, and no guarantee of a positive return, many high-net-worth individuals enjoy the status and satisfaction they receive for supporting the art world.
- The Pros: Art investment expenses are deductible if you can show that its purchase was to hold the art for the purpose of generating income. Buying art for a defined “small business” can be claimed as a write-off and you can claim unlimited works of art as you like, if each one is purchased for under $20,000.
- The Cons: As with any investment, due diligence and research is imperative before plunking down millions on a soup can painting. If you want to become a regular on the auction circuit, be sure you have several million dollars on hand before holding up your paddle. But if you want to minimize your risk, consider mutual funds that exclusively invest in art.
The TEFAF Art Market Report notes that, “the vast majority of art produced in the world has no resale value at all.” Nonetheless, being part of your local art scene may provide social, cultural, and networking opportunities you would not receive from standard investments. Perhaps you just want bragging rights.
Andy Warhol once said: “Everything has its beauty, but not everyone sees it.” For the would-be art investor, not everyone will appreciate your collection. If you intend to dive into the deep end of the art world with a seven-figure purchase, be sure you love what you’ll be looking at for years to come. Most importantly, for smaller investors, don’t count on an art purchase to fund your retirement of daughter’s college tuition.
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