10 Jul Recording Artists Get a Little Present in the One Big Beautiful Bill
The One Big Beautiful Bill has one clear benefit to US-based independent recording artists for calendar year 2025. As of January 1, 2025, the first $150,000 of recording costs incurred by a recording artist in creating sound recordings and released this year can be deducted from their income tax when filing their return next year.
The change specifically amends section 181(a)(1) of the Internal Revenue Code to include sound recordings. Beginning in October 2004, the section created a deduction to benefit certain people for costs incurred in connection with the production of certain motion pictures and television programming, subject to a cap, and then in 2016, for costs incurred in connection with the production of a theatrical play. Only those investors who either are engaged in that trade or business – film, TV or theater production — (working 750 hours per year in that trade) or who have qualifying passive income in excess of the amount sought to be deducted, can benefit from the provisions of this section.[1]
Since an independent recording artist, who records her own material, is quite likely to be engaged in that trade or business for more than 750 hours per year, that recording artist will likely satisfy the requirements of the passive income rules, rendering the costs incurred in creating such a recording fully deductible.[2] On the other hand, a person with a full time job, such as a practicing lawyer, or a full time teacher or fireman, who creates a sound recording, will not be eligible to deduct those expenses, since that person is not engaged in that trade or business, unless that person has qualifying passive income in excess of the amount sought to be deducted. Qualifying passive income is typically real estate rental income, and specifically does not include dividends, interest or other proceeds from investment activity. [3]
By its terms, section 181 expires on December 31, 2025. It has died and been resurrected several times since its first enactment in 2004, so we cannot say whether this benefit will end on New Year’s Eve or will be continued. But until that time, the deduction is welcome news to independent artists.