Film Tax Deduction Strategy

A tax strategy that allows wealthy individuals to get large tax deductions by investing in film production, leveraging Obama-era depreciation rules and state tax credits.

Core Mechanics

• Put down $150k cash to get $1M tax deduction
• In California, $1M deduction saves ~$400k in taxes
• Remaining $850k typically funded through loans and state tax credits
• Can write off 100% of film costs before production begins
• Must qualify as "active investor" through 36 hours of film study

Key Components

Funding Structure

• Initial cash investment (~15% of total budget)
• State tax credits (up to 30% of budget)
• Loans to cover remaining costs
• International rights sales
• Netflix/streaming platform deals

State Incentives

• States like Georgia and Alabama offer up to 30% in tax credits
• Credits can be sold for 90 cents on the dollar
• States want:
  • Local jobs
  • Tourism appeal
  • Cultural development
  • Business activity

How Companies Package Deals

• Companies acquire movie rights throughout year
• Hold options until year-end
• Match clients with appropriate size projects
• Bundle investors together for larger projects
• Focus on budget size vs. plot/script quality

Risk Management

• Don't need movie to be profitable
• Just need to pay off loan amount
• Tax benefits received upfront
• Revenue from movie is bonus
• Multiple funding sources reduce risk

Qualification Requirements

• Must be "active investor"
• Complete ~36 hours film study
• Attend film festivals
• Similar to real estate active investor rules
• Allows offsetting against active income