This article will focus on breaking down the different tax reliefs available to self-employed film industry professionals.

We are a team of offline and online accountants that are specialist in tax for creative industry professionals. With offices in New York and London, we are able to offer our clients a personal tax service that is tailored to individuals wants and needs. Our team of US and UK tax professionals are expert in business income, business expenses, cross-border tax, employed income, self-employed income and all other areas of tax that is relevant to creative industry professionals.

In this bite-size article our accountants have broken down the following:

·     What is Tax Relief?

·     What is the difference between Deductions, Credits, and Exemptions?

·     What Type of Relief could an Actor/ Film Maker be Entitled too?

·     How do I claim this Relief?

 

WHAT IS TAX RELIEF

So what is tax relief? It seems to be a very broad term. Well, Tax relief refers to any systems that will aid you in reducing your tax liability.

These include:

·     Deductions

·     Credits

·     Exemptions

In summary, tax relief can save you money.

TAX DEDUCTIONS

A Tax Deduction is used to lower your overall tax liability as a self-employed professional. To quote the IRS. Tax deductions should be subtracted from sole traders and businesses total income to calculate total taxable income. These calculations will be included on your self-employed tax return.

For example, if your gross income is $20,000 then you are liable to pay the amount of tax that corresponds to the tax brackets you enter. Now, if you were to have $2000’s worth of tax deductions, this means you are only liable to pay tax on $18,000 of your income.

 

TAX CREDITS 

Self-employed individuals often confuse Tax Credits with Tax Deductions. To offer clarity, where tax deductions reduce the overall income you have to pay tax on, Tax Credits directly reduce the amount of tax you owe.

For example, if you owed $4000 in Tax and you had Tax Credit that was worth $2000, once subtracted from your overall tax you would be left owing $2000.

 

Tax Credits fall into 2 categories:

·     Refundable Tax Credits - These allow you to be refunded any excess if the tax you owe falls below zero, e.g. if you owed $1000 and you had a $1500 Tax credit, the IRS would be liable to refund you the excess $500

·     Non-Refundable Tax Credits - These do not allow a refund, In the above example the $500 excess will not be refunded to you

TAX EXEMPTIONS 

Tax exemptions can come in different forms, but the general idea is that they will reduce a proportion or your entire Tax Liability. These usually apply, but are not limited too:

·     Religious Organizations - Places of Worship, Charitable organizations, etc.

·     Pension Schemes

·     Educational Institutions

WHAT TAX RELIEF AM I ENTITLED TO TAX RELIEF

The acting/ film industry has a plethora of areas where you may be able to find tax relief.

Deductions

Below is a list of deductions an actor or filmmaker should consider when filing their tax return. Needless to say, having an accurate record of the cost, where possible, is highly advised. These usually come in the form of receipts. 

·     Travel - Any transportation, accommodation, Airfare that occur as a direct result of your work. You can also include 50% of Meals within this category

·     Agent Fees

·     Manager Fees

·     Equipment - Film Camera, Lights, etc.

·     Headshots

·     Office Expenses

·     Education

·     Promotional Expenses - Photos, Videos, Websites, Advertisements in trade publications, Business cards and other promotional expense

·     Makeup and Wardrobe - Deductible only when incurred through business use directly, i.e. not for a pair of Jeans you have used on stage but also wear day-to-day outside of Acting

·     Subscriptions: Magazines, Newsletters and other Subscriptions relevant to your business

·     Legal and Professional Fees

·     Tickets for Viewings Films or Plays - Only to keep up to date with the industry and for research that directly relates to your business

 

Tax Credits

Tax Credits within the Acting/ Film Industry can usually be found within state-to state incentives for filmmakers. These incentives are applied if you film within a state and adhere to their guidelines for receiving said incentives.

Below are a few examples of the guidelines for State-to-state Tax incentives regarding location filming

 

California Film Commission 

The California Film Commission administers the Film & Television Tax Credit Program… that provides tax credits based on qualified expenditures for eligible productions that are produced in California. 

The Guidelines vary for different filming types. For Example, Independent films can receive a 25% transferable Tax Credit as long as there is a ‘$1 million minimum budget’ and ‘only applies to the first $10 million of qualified expenditures’.

 

New York, Film Tax Credit Program

As With California, New York provides its own tax credit program for location filming and the guidelines vary for different types of filming, as before.

 For Example, The New York State Film Tax Credit Program (Production) features a 30% refundable Tax Credit with a cap of $420 million per fiscal year. It also offers an extra 10% for upstate filming, limited to $5 million

 

 

Atlanta, Georgia Tax Credit Incentives

 Atlanta Georgia offers, “tax credits of up to 30 Percent” for film television and digital entertainment. There is a minimum spend of $500,000 with no production cap. The state also offers a 10% increase to the offered tax credit “if the finished project includes a promotional logo provided by the state”.

 

Exemptions 

Although exemptions are harder to come by, they are not non-existent and usually dwell within the realms of the state-to-state incentives listed above. For example, states such as Connecticut and Kentucky[10], to name a few, offer exemptions on Sales Tax, Lodging Tax or both for Film production within the listed location.

FOR ADDED RELIEF 

Working out what relief you are entitled too is a vital part of ensuring you do not overpay on your tax. Whilst this article will help you navigate the muddy waters of claiming relief, you should also consider the use of a financial professional where possible.

CONTACT US FOR EXPERT TAX SUPPORT ON YOUR SELF-EMPLOYED TAX RETURN