My Last Blog on Taxes

Well, at least for this tax season.  I just e-filed my tax returns.  What a big relief.  This was the first year that I had retained a CPA to help me with my taxes, in large part because we had formed the production company last year and we needed to file a tax return for the LLC.  The downside to using an LLC entity as our production vehicle is that the California Franchise Tax Board imposes an annual $800 fee on LLCs.  This doesn't sound like much, but for indie filmmakers every penny hurts.  The upside to using an LLC is the flexibility that it provides with respect to the allocation of profits and losses, and it's also considered a "pass-through" entity which means that the losses that the LLC incurred in production can be passed through to the investors.  Filmmakers should consider retaining a good CPA to guide them through the process of deducting production expenses on their tax returns.  

There is also another tax benefit for filmmakers whereby you only have to pay 3% taxes on products you use for post. A fellow filmmaker pointed this out to me but I haven't had a chance to read up on this, as I've been obsessed about finishing up my tax returns (that, and playing Texas Hold'em on Facebook).  Stay tuned--I will post additional info soon on this.  So I guess I lied when I said this will be the last post on taxes.   

Tax Incentives for Film Investors, Pt. II

As I noted in a prior post, there are possible tax benefits for film investors under Section 181 of the tax code.  (Now, if I was trying to write a legal memo, I would use the correct cite, but I will refrain here.)  I met with a CPA recently to discuss this rule, and it appears that Section 181 is definitely available for this tax year.  (Again, my disclaimer: I am not a tax attorney nor have I ever wanted to be a tax attorney nor have I ever wanted to date anyone who is a tax attorney.  This blog is not meant to be tax advice.  You will need to consult with your own tax advisor.)  The main benefit of this rule is for film investors who are also "active investors" in the production entity, who would be able to deduct their investment against ordinary income.  "Passive investors" will only be able to deduct their investment as a passive loss against passive income, in the year when a loss is recognized.  Since we formed an LLC as the production entity, the LLC will need to file its own tax return, and in turn, "pass-through" the production expenses to the individual investors.  Sec. 181 can be extremely beneficial for filmmakers who have invested in their own films.  This of course assumes that struggling filmmakers have other income to offset their losses.  That is another topic for another day.

Tax Incentives for Film Investors

I attended a seminar yesterday where someone talked about the tax deductions that a film investor can take if they invest in a film.  While I don't know the particulars of this tax law, I think it would be very useful to find out about it from a tax advisor or a tax attorney.  Here is my disclaimer that I am not a tax advisor or a tax attorney, nor have I ever wanted to be a tax advisor or tax attorney, so please do not consider any of this tax advice.  Anyway, I posted the link to the article above (just click on the title of this blog entry).  If anyone has any knowledge of this tax credit and/or has used it to get some money back from Uncle Sam, I would love to hear about it.