The Why And What Of Appraisal For IRS Purposes

When art and antiques cross paths with taxes, definitions and documentation matter. The IRS relies on appraisals to set fair, consistent values for noncash charitable contributions, estate and gift tax reporting, and certain losses. For enthusiasts, collectors, and practitioners, understanding what the IRS expects—and why—reduces audit risk and protects your deductions.

This guide focuses on the practical: when an appraisal is required, what “qualified” actually means, how to structure a compliant report, and where collectors most often stumble.

Fair Market Value vs. Other Value Definitions

The IRS’s anchor is Fair Market Value (FMV): the price at which the property would change hands between a willing buyer and a willing seller, neither under compulsion, both having reasonable knowledge of relevant facts. For art and antiques, FMV is typically supported by recent sales of comparable works in the appropriate market (often auction, sometimes reputable dealer sales).

Don’t confuse FMV with:

• Retail replacement value: The cost to replace the item with a similar one at retail, used for insurance. This is usually higher than FMV and is not the IRS standard for deductions or estate reporting.
• Liquidation value: A quick-sale price. Rarely relevant to IRS filings unless the circumstances require forced sale analysis.
• Cost or basis: What you paid. Important for calculating deduction limits and gain or loss, but not the starting point for FMV.

For some large holdings, an appraiser may apply a “blockage” or market absorption discount if selling all at once would depress prices, especially for multiple works by the same artist. For fractional interests in tangible personal property, discounts are uncommon but can be argued in special situations.

When You Need an Appraisal

You don’t always need a full appraisal, but when you do, the thresholds and forms are specific.

• Noncash charitable contributions:

  • More than $500 total in a year: File Form 8283.
  • More than $5,000 for an item or a group of similar items: Obtain a qualified appraisal and complete Form 8283, Section B (signed by you, the appraiser, and the donee organization).
  • Art valued at more than $20,000: Attach a complete signed appraisal to your return; the IRS may request photographs.
  • Any property valued at more than $500,000: Attach the qualified appraisal to your return.
  • Special notes:
    • Publicly traded securities are exempt from the appraisal requirement.
    • If you held the item for one year or less, your deduction is generally limited to cost basis, not FMV.
    • If the charity’s use is unrelated to its exempt purpose (the “related use” rule), your deduction may be limited to basis.
    • If the charity disposes of the item within three years, it must file Form 8282; unrelated use or early sale can affect your deduction.

• Estate tax (Form 706) and gift tax (Form 709):

  • A qualified appraisal supports reporting for artworks, antiques, and collectibles.
  • Estate valuations are as of the decedent’s date of death or the alternate valuation date (six months later) if elected.
  • For gifts, value is as of the date of gift. Attach appraisals and schedules supporting reported values.
  • High-value art may be reviewed by the IRS Art Advisory Panel.

• Casualty and theft losses:

  • For personal-use property, deductions are generally limited to losses attributable to federally declared disasters (in effect for tax years 2018–2025).
  • The loss is the lesser of your basis or the decrease in FMV due to the event, reduced by insurance or other reimbursement. An appraisal can substantiate the before-and-after FMV and explain condition changes.

Timing matters. For charitable contributions, the qualified appraisal must be signed and dated no earlier than 60 days before the donation and no later than the due date (including extensions) of the return on which you claim the deduction.

What Makes an Appraisal “Qualified” (and Who Can Sign It)

The IRS has precise definitions.

• Qualified appraisal:

  • Prepared in accordance with generally accepted appraisal standards (USPAP is the practical benchmark).
  • Relates to the appropriate effective date (e.g., date of donation or date of death).
  • Includes all required content (see next section).
  • Not based on a prohibited fee arrangement (contingent on value or event of allowance).

• Qualified appraiser:

  • Has verifiable education and experience valuing the specific type of property (e.g., American paintings 1900–1950, 18th-century English furniture, tribal art).
  • Holds an appraisal designation from a recognized professional organization or can document equivalent education and experience.
  • Regularly performs paid appraisals.
  • Is independent: not the donor, the donee, a party to the transaction, or someone with a conflict of interest.
  • Not barred from practice before the IRS and not convicted of a felony involving valuation or fraud.

A museum curator or dealer can be a qualified appraiser if they meet the education and experience standards and are independent. However, the donee organization generally should not appraise property it receives.

Penalties for misstatements are real:

• Donor penalties: Accuracy-related penalties may apply if you substantially overstate value.
• Appraiser penalties: Understatement or overstatement penalties can apply under IRC section 6695A for substantial or gross valuation misstatements.

What to Include in an IRS-Ready Appraisal Report

A compliant report reads like a clear, defensible narrative paired with data. The IRS expects, at minimum:

• Identification of the appraised property:

  • Detailed description: artist/maker, title, medium/materials, dimensions, edition, signature/marks, date/period, subject, inscriptions, and any restoration.
  • Provenance (ownership history), exhibition and publication history, and literature references, if applicable.
  • Condition report: specific, with noted defects, repairs, or conservation.

• Valuation specifics:

  • Effective date of value (e.g., date of donation or date of death).
  • Appraisal date and report date (signed and dated by the appraiser).
  • Defined value standard: fair market value per IRS definition.
  • Valuation approach and methodology: sales comparison analysis is typical; address market level selection (auction vs. dealer), adjustments for differences (size, condition, date, subject, edition), and rationale for premiums or discounts.
  • Comparable sales data: citations with sale date, venue, lot number, hammer price/premium, and why each comp is relevant or not. Include multiple comps when possible and explain outliers.
  • Market context: liquidity, demand trends for the artist or category, and any extraordinary factors (blockage, restrictions, legal issues).

• Administrative content:

  • Appraiser’s qualifications: education, experience, specialty focus, professional designations, and valuation experience with the specific property type.
  • Statement of independence and fee structure; confirm no contingent fee.
  • Purpose and intended use: charitable contribution, estate reporting, gift reporting, or casualty loss.
  • Donor/owner information, acquisition details, and holding period where relevant.
  • Any terms restricting use or sale of the property.
  • Required declarations:
    • The appraisal was prepared for income/estate/gift tax purposes.
    • The appraiser met the qualified appraiser criteria when the report was signed.
    • The report complies with generally accepted appraisal standards (e.g., USPAP).

• Attachments when applicable:

  • Photographs sufficient to identify the property.
  • Scientific or scholarly reports (e.g., pigment analysis, dendrochronology, signature authentication).
  • For artworks over $20,000, attach the complete signed appraisal to the return; the IRS may request images. For any property over $500,000, attach the appraisal.

Form logistics:

• Form 8283 (for donations) Section B must be signed by the appraiser and the donee organization. Keep a complete copy.
• The appraisal must be dated within the IRS’s 60-day-before to return-due-date window for donations.

High-value art option:

• For art valued at $50,000 or more, you can request a Statement of Value from the IRS in advance. This gives added certainty but involves a submission packet and user fee.

Practical Checklist: From Object to IRS Filing

• Define the purpose and effective date.

  • Donation: date of contribution.
  • Estate: date of death (or alternate valuation date).
  • Gift: date of gift.
  • Casualty loss: immediately before and after the event.

• Choose the right appraiser.

  • Specialty aligned with the object.
  • Verifiable education/experience; USPAP-compliant.
  • Independent, no contingent fee.

• Assemble documentation.

  • Purchase invoices, prior appraisals, provenance letters, conservation reports, certificates, exhibition and publication records, high-quality photos.

• Confirm the correct value standard.

  • FMV for IRS purposes, not retail replacement.

• Determine the appropriate market.

  • Auction vs. dealer sales; regional vs. international; reflect where knowledgeable buyers and sellers transact.

• Support value with comparables.

  • Recent, relevant, and adjusted for differences; explain selection and weighting.

• Address condition transparently.

  • Note restoration, damage, or alterations; state how they affect value.

• Watch the thresholds.

  • $500: Form 8283.

  • $5,000: qualified appraisal and 8283 Section B.

  • Art >$20,000: attach appraisal.
  • Any property >$500,000: attach appraisal.

• Complete signatures and timing.

  • Appraisal dated within the 60-day window before donation and no later than the return due date.
  • Appraiser and donee sign Form 8283 Section B.

• Understand deduction limits.

  • Holding period under one year or unrelated use may cap deduction at basis.
  • Inventory/ordinary income property has special rules.

• Retain records.

  • Keep the appraisal, comps, images, and correspondence. Charities should track for potential Form 8282 filing upon disposition.

• Consider a pre-filing review for high-value art.

  • Statement of Value option for $50,000+ artworks.

FAQ: Quick Answers for Donors and Executors

Q: Does an insurance appraisal work for the IRS? A: Usually not. Insurance appraisals are based on retail replacement value. The IRS requires fair market value supported by market sales; ask the appraiser for an IRS-compliant report.

Q: How recent must the appraisal be for a donation? A: The qualified appraisal must be signed and dated no earlier than 60 days before the donation and no later than the due date (including extensions) of the return where you claim the deduction.

Q: Who signs Form 8283 for a donation over $5,000? A: You sign, the qualified appraiser signs, and the donee organization signs Section B acknowledging receipt. Keep a full copy with your records.

Q: Do estates have to file photographs of the art? A: Photographs are best practice and often expected. For donations of art over $20,000, the IRS may request photos; estates should include images in the appraisal and supporting schedules to facilitate review.

Q: What happens if the IRS disagrees with my value? A: The IRS Art Advisory Panel or engineering/valuation specialists may review the appraisal. If they adjust the value, your deduction or tax may change, and penalties can apply for substantial misstatements. A well-supported, independent appraisal mitigates this risk.

By treating the appraisal as a disciplined, evidence-based analysis—and matching the report to IRS expectations—you improve certainty, protect deductions, and streamline reviews. For collectors and appraisers alike, the key is simple: define the standard, document the facts, and defend the conclusion with market data.