Tax Deductions for Independent Filmmakers
The motion picture industry in America, according to attorney Levin Ginsburg's Lawgram newsletter, is a nearly recession-proof business. Artists from all backgrounds are using personal equipment and other resources to create memorable pieces of art. Anyone interested in independent filmmaking as a career will no doubt be satisfied creatively, but what about financially? There are actually several ways an independent filmmaker can boost the bottom line and the IRS maintains specific guidelines and tax breaks to do so.
IRS Definition of a Business
According to the Fine Art Registry, the IRS provides criteria for filmmakers to qualify as a business. First, the filmmaker must operate in a businesslike manner. Second, he should depend on the sales of work as income and have had success in doing so in the past. Third, the filmmaker must have the knowledge to be successful in the business. The Registry notes that these criteria are not set in stone and if the filmmaker has turned a profit in the past, he has achieved a critical step in qualifying as a business.
Calculating Income
Calculating a filmmaker's income can be tricky but the Volunteer Lawyers for the Arts says that a good example would be to consider two painters who are exchanging a piece of work. Painter A spent $75 on his equipment and sold it to Painter B for $1,000. Painter A would subtract his expenses of $75 from the retail value of his work, giving him a taxable income of $975. Use this methodology when selling a short film or other piece of work to buyer.
Deductions
Publication 529 of the IRS tax code states that an independent filmmaker can deduct a wide variety of business-related expenses as a performing artist. These qualifying items include dues to unions such as the Screen Actors Guild, tools and supplies used for the film, travel, transport, meal, entertainment gifts and local lodging. There are many more items listed in section 529, so be sure to get final approval from a qualified tax specialist before filing.
The Home Studio
The Volunteer Lawyers for the Arts says that independent filmmakers are considered self-employed because the business and taxpayer are, in essence, the same. Take for example an independent filmmaker sitting at his own laptop in his studio apartment working on the next great screenplay. He is eligible to deduct the home office expense on IRS Form 8829 and by filing a separate Schedule C, where he will report all those expenses, with the regular Form 1040.
Show Me the Receipts
The Fine Arts Registry points out that the IRS is getting tougher on deductions and that all artists, including filmmakers, should keep detailed journals of all business expenses and ensure receipts and other supporting documentation are in order. Keep copies of credit and debit card statements, bank records and mileage logs to prove the ultimate legitimacy of the business.
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