"Are you tired of the same old investments in real estate, stocks, etc.? The TV and movie industry is calling if you want to diversify your portfolio with something a little more exciting. Section 181 and Section 168(k) offers tempting tax benefits and a chance to support the entertainment world."
Investors can deduct any production costs they pay (up to $15 million) as a deductible expense in the same year those costs are incurred. So you can get a tax break right away, rather than waiting and spreading the deduction over several years.
Essentially an accelerated deduction against your taxes for the total value of a film asset. For example if you put $1M into a $10M film, you get to claim the full $10M in the year that you make that investment.
Additionally, if you invest in a project that film in a low income "economically depressed” area, this limit goes up to $20 million, a 33% bump on the value of the deduction, on top of the 181. The deduction applies the year the costs are incurred, which is great news if you don’t want to wait for the film to be released to start seeing the tax benefits.
The deduction applies to passive and active income. So, whether you’re a passive investor or more actively involved in the production, you can still benefit from this incentive.
So what is Section 168 (k)?
Section 168(k) refers to bonus depreciation, which allows businesses to immediately deduct a significant percentage of the purchase price of eligible business assets, including film and TV production costs. Unlike Section 181, which allows a deduction in the year expenses are incurred, Section 168(k) spreads the deduction over several years, typically providing a longer-term tax benefit.
Note: This is not tax, legal or accounting advice. This post has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own professional tax, legal and accounting advisors before engaging in any Film/TV transaction.