Planning your next recording project? You could be eligible for a major tax break that puts more money back into your music.
What Is the HITS Act?
The Help Independent Tracks Succeed (HITS) Act is a federal tax law designed to support independent musicians, producers, and labels. It allows creators to deduct up to $150,000 in qualified sound recording production expenses in the same year those costs are incurred, rather than spreading them out over time.
To qualify, recordings must be produced and recorded in the United States.
Why It Matters
Before the HITS Act, music creators had to capitalize and amortize production costs over the life of a recording, delaying financial relief. Now, music is treated like film, TV, and theater productions, giving artists faster access to tax benefits and encouraging reinvestment in creative work.
This shift recognizes independent music creators as entrepreneurs and small business owners, deserving of the same support as other creative professionals.
FAQs About the HITS Act
1. Who qualifies for the deduction?
Independent artists, songwriters, producers, and record labels who incur eligible recording expenses in the U.S. for new sound recordings.
2. What expenses are deductible?
You can deduct costs directly tied to sound recording production, including:
- Studio rental fees
- Engineer and producer fees
- Mixing and mastering
- Session musician payments
- Equipment rentals
- Marketing, touring, and distribution costs are not covered.
3. How much can I deduct?
Up to $150,000 per year, as long as the recording is produced in the U.S.
4. How is this different from past tax rules?
Previously, you had to amortize recording costs over the life of the recording. Now, you can fully expense them in the year they’re incurred—just like film and TV projects.
5. Does this apply to singles or digital-only releases?
Yes! The HITS Act covers EPs, singles, and digital-only releases, as long as the expenses meet the criteria.
6. What should I do to take advantage?
- Keep detailed records of all production-related expenses.
- Work with a tax advisor who understands entertainment industry deductions.
7. Any other benefits?
Yes. The final version of the bill also blocked a proposed federal ban on state-level AI regulation, preserving states’ ability to protect artists from unauthorized AI use of their voice, likeness, or creative work.
Understanding the specifics of the HITS Act, from eligibility to deductible expenses, can help independent creators make informed financial decisions. As legislation continues to evolve, staying current is essential.
In summary, the HITS Act offers independent music creators a meaningful opportunity to deduct up to $150,000 in qualified U.S.-based recording expenses in the year they’re incurred, bringing music production in line with other creative industries. The PM Entertainment & Music Group monitors developments like this to help clients understand and apply relevant tax provisions. For further clarification or to explore how this may apply to your work, contact Alyson Clark-Garvey, CPA, Senior Manager.
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