The entertainment industry just received a major boost. Embedded in the newly enacted federal “One Big Beautiful Bill” (H.R. 1, Public Law 119‑21) is a transformative update to Section 181 of the Internal Revenue Code — expanding its reach and unlocking significant new opportunities for film, television, and now, recording artists and labels. These opportunities even have the potential for extension under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
What is Section 181?
Section 181 allows qualifying U.S. productions to deduct production costs in the year expenses are incurred, instead of amortizing them over time. Traditionally, this has applied to film, television, and live theatrical projects up to:
- $15 million for most U.S. productions, and
- $20 million for those in designated distressed counties (e.g., under the Delta Regional Authority).
Now — for the first time — sound recordings produced in the U.S. qualify for immediate expensing, capped at $150,000 per taxable year.
The Key Change: Recording Artists and Labels in the Spotlight
Under the updated legislation:
- Eligible U.S.-based music recordings, albums, streaming audio series, music videos, and concert films now qualify for accelerated Section 181 deductions.
- Independent artists and labels can deduct up to $150,000 of eligible production costs in the same tax year they are incurred. Anything above that limit may still benefit from bonus depreciation.
What Recording Artists and Labels Should Know
- Unlock New Business: Artists and labels can benefit from federal tax savings, which is especially valuable for high-budget music projects and independent artists and labels investing in emerging talent.
- Double-Dip with State Incentives: In states like Georgia, productions can stack Section 181 deductions with state film tax credits (up to 30%) under the Georgia Entertainment Industry Investment Act (OCGA 48-7-40.26).
- Watch the Sunset Date: Section 181 currently expires after Dec. 31, 2025, and only applies to productions that commence before that date. The CREATE Act, however, could extend its life until 2030.
- Meet U.S.-Personnel Requirements: At least 75% of compensation costs must go to U.S. personnel, and productions must take place within U.S. borders.
Who Stands to Benefit?
- Film and TV producers incorporating original music production can now deduct these costs separately and speed up their deductions through accelerated depreciation
- Streaming platforms funding exclusive music content or audio documentaries along with motion pictures and serialized content
- Music labels financing U.S.-based recordings
- Independent artists and small labels are now gaining access to previously unavailable accelerated depreciation.
On the Horizon: The CREATE Act
Pending legislation — the CREATE Act, introduced by Rep. Chu (Calif.), Rep. Malliotakis (N.Y.), Sen. Warnock (Ga.), and Sen. Blackburn (Tenn.) — would strengthen and extend Section 181. Its key provisions include:
- Extension of Section 181 through Dec. 31, 2030 (currently set to expire end of 2025)
- Increased thresholds: $30 million (base deductible) and $40 million (distressed areas)
- Annual inflation indexing starting in 2027, adjusted to the nearest thousand dollars
- This bipartisan, bicameral effort is designed to sustain domestic production and preserve well-paid, creative jobs in the U.S.
