Bonus Depreciation for Film, TV and Stage Productions
By Timothy LeGendre, CPA · Florida License #AC62625 · Published 2026-10-01
How Section 168(k) bonus depreciation works for film, TV and stage productions: the 100% rate, the 75% test, the release-date rule and investor limits.
The Short Answer
A qualified film, television or live theatrical production is property that can take 100% bonus depreciation under Section 168(k), the same first-year write-off a business takes on a new machine. Three rules decide whether that write-off is real for you. The production has to pass a 75% U.S. compensation test. The deduction lands in the year of the first commercial release or broadcast, not the year the money was spent. And if you are an investor rather than the producer, the loss still has to get past the at-risk, passive activity and excess business loss limits on your own return before it saves you any tax.
Why a film counts as depreciable property
Most people think of bonus depreciation as an equipment rule: trucks, machinery, computers. The statute is wider than that. Section 168(k)(2)(A)(i) lists a qualified film or television production as qualified property in its own right, along with a qualified live theatrical production and, since the 2025 tax law, a qualified sound recording production.
The definition is borrowed from Section 181, the older film-expensing provision, with two pieces deliberately removed. Section 168(k) reads the Section 181(d) definition "without regard to" the Section 181 dollar cap (generally $15 million per production, higher in certain low-income and distressed areas) and without regard to Section 181's expiration date.
That second point is the one that matters now. Section 181(h) ends the Section 181 election for productions commencing after December 31, 2025. For a production starting in 2026, bonus depreciation is not one option among two. It is the first-year write-off that is left.
The 100% rate, and the date that decides it
The One Big Beautiful Bill Act made 100% bonus depreciation permanent for property acquired after January 19, 2025. IRS Notice 2026-11, issued in January 2026, carries that rule through to productions. What changes for a film is the meaning of "acquired".
You don't buy a film you make yourself on a single day, so the regulations pick one. A self-produced film or television production is treated as acquired on the date principal photography commences. A live theatrical production is acquired when all the elements needed to stage it are secured. Pre-production spending does not move the date. The first day of the shoot does.
| If the production | Bonus rate | Why |
|---|---|---|
| Principal photography began after January 19, 2025 | 100%, permanently | The One Big Beautiful Bill Act rate. No phase-down. |
| Principal photography began on or before January 19, 2025, released in 2025 | 40% | The old phase-down schedule still governs. |
| Principal photography began on or before January 19, 2025, released in 2026 | 20% | Same old schedule, one step further down. |
There is also a narrow election in the other direction. For the first taxable year ending after January 19, 2025, and only that year, a taxpayer can elect a 40% rate instead of 100% (60% for long-production-period property). For a calendar-year taxpayer that is the 2025 return, so it only reaches a production released in 2025. For anything released later, the way to avoid a first-year loss nobody can use is the production-by-production election out described below.
What makes a production "qualified"
The Section 181(d) definition and its regulations (Treas. Reg. §1.181-3) set the tests. They are mostly about where the work happened and who did it:
The 75% U.S. compensation test
At least 75% of the total compensation paid for the production has to be for services performed in the United States by actors, directors, producers and other production personnel.
Participations and residuals are left out
Back-end participations and residuals do not count as compensation for the test, in either the numerator or the denominator.
The person has to be here
Services count as U.S. services only when the person performing them is physically present in the United States. Animation has its own location rule, and U.S. territories do not count.
Series stop at episode 44
For a television series, only the first 44 episodes can be qualified productions.
Certain content is excluded
Productions that require records under 18 U.S.C. 2257 are excluded by the statute.
The 75% test is the one that sinks productions. A film with a few weeks of overseas location work and a large foreign crew payroll can fall below the line without anyone noticing until the return is being prepared. If part of the shoot will happen outside the U.S., the time to run the numbers is when the budget is built, while the plan can still change.
Placed in service means released
Equipment is placed in service when it is ready to use. A film is placed in service at its initial release or broadcast, and Section 168(k)(2)(H) says so directly. The regulations define initial release as the first commercial exhibition or broadcast to an audience. Festival screenings and test screenings do not count. A live theatrical production is placed in service at its first live staged performance.
| Event | Tax effect |
|---|---|
| Principal photography begins | Fixes the acquisition date, and so the bonus rate |
| Cash is spent on production | Builds basis, but deducts nothing yet |
| Festival or test screening | Not a release. Still nothing deducted |
| First commercial exhibition or broadcast | Placed in service. The bonus deduction lands in this year |
This is where expectations break. An investor writes a check in the spring expecting a deduction that year. The shoot wraps in the fall, post-production runs long, and the distributor sets a January release. The whole deduction moves into the next tax year. Nothing was lost. It simply arrives twelve months after the plan assumed it would, and an estimated tax payment built on the wrong year is still short.
Looking at a film deal? Test the tax side first.
Before you sign, I'll walk through whether the production qualifies, which year the deduction lands in, and whether you can actually use it.
Pick a time on my calendar. No obligation.
What goes into the deductible cost
Bonus depreciation applies to the production's depreciable basis, and the regulations borrow the Section 181 meaning of production costs. That means the costs of producing the film itself. It specifically leaves out costs to distribute it, advertise it and make prints, and the costs of a later re-release.
In practice, that means the books have to separate those buckets from day one. A production company that runs marketing, festival travel and distribution costs through the same account as camera rentals and crew payroll has a basis it cannot defend. Those other costs still have their own tax treatment. They just are not part of the bonus depreciation number.
If the bonus rate is below 100%, or the owners elect a lower rate, the remaining basis is recovered under the normal depreciation rules. The Form 4562 instructions point out that films are one of the few assets allowed to use the income forecast method, which spreads the cost over the years in proportion to the income the film earns, and that the depreciable base must first be reduced by any bonus amount taken.
How the deduction is claimed, or declined
Bonus depreciation is automatic. It is reported on Form 4562, line 14 (special depreciation allowance), filed by whoever owns the production: usually the production LLC or partnership, which then passes the deduction through to its owners on their K-1s.
Declining it works differently for a film than for equipment. For most property, the election out of bonus depreciation applies to an entire class of property for the year. For productions, Treas. Reg. §1.168(k)-2(f)(1) treats each separate production as its own class. A company with two releases in the same year can take bonus on one and decline it on the other. The election is made with a statement attached to a timely filed return.
One trap is worth knowing: bonus depreciation is generally not allowed on property that is placed in service and disposed of in the same taxable year. A production company that releases a film and sells it in the same year should have that conversation before the sale closes, not after.
The investor question: can you actually use the loss?
This is the part film deals tend to oversell. A 100% write-off at the production entity becomes a large loss on the investors' K-1s. Whether that loss reduces your tax depends on three limits, applied in order on your own return:
- •At-risk rules (Section 465). IRS Publication 925 lists holding, producing or distributing motion picture films as an at-risk activity. Your deductible loss is capped at what you actually have at risk, generally the cash you put in and debt you are personally liable for.
- •Passive activity rules (Section 469). If you do not materially participate in the production, your share of the loss is passive. Passive losses offset passive income only. The rest is suspended and carried forward until you have passive income or dispose of your interest.
- •Excess business loss limit (Section 461(l)). Even a loss that clears the first two limits can only offset so much non-business income in a single year. The excess becomes a net operating loss carryforward.
A hypothetical, to make it concrete
A production LLC begins principal photography in March 2026 and spends $1,000,000 of qualifying production costs. If the film commercially releases in December 2026, the LLC can take $1,000,000 of bonus depreciation on its 2026 return. If the release slips to January 2027, the same deduction belongs to 2027. Now say you are a passive investor allocated $200,000 of that loss. If you have no other passive income, the loss generally does not reduce your 2026 tax at all. It waits, carried forward, until passive income or a sale frees it up.
None of that makes a film investment a bad investment. It means the tax benefit is part of the analysis, not the reason for the deal. Anyone pitching you the deduction as if it lands on your return automatically is skipping these three steps.
The Florida angle
Florida has no personal income tax, so for an individual investor or an owner of a pass-through production company, everything above is a federal calculation. There is no separate state version of the deduction to track.
The exception is a production structured as a C corporation. Florida's corporate income tax decouples from federal bonus depreciation, so the bonus amount is added back and recovered over seven years on the Florida return. My guide to Florida depreciation rules covers how that addback works.
The file I want before the return is filed
A film deduction is large, unusual and fact-driven, which is a fair description of what draws a closer look. Every element above rests on a document that should exist before the return goes in:
- •Proof of the date principal photography began, since it decides which bonus rate applies
- •Compensation records sorted by where each service was physically performed, to support the 75% test
- •Proof of the first commercial release or broadcast: the distribution agreement, the air date, the opening date
- •A cost ledger that separates production costs from distribution, advertising and print costs
- •The seller's compensation records, if the production was bought rather than made
How I handle this for clients
If you are reading this, you are probably not a filmmaker. You are more likely a business owner who has been offered a piece of a production and told it comes with a large deduction. My job is to answer the question the pitch skips: in which year does the deduction land, and how much of it actually reduces your tax, given everything else on your return?
That means reading the operating agreement for how losses are allocated, checking the production's plan against the 75% test, being realistic about the release date, and running the at-risk, passive and excess business loss limits against your actual income. Sometimes the answer is a meaningful current-year benefit. Often it is a deduction that waits. Either way, you know before you wire the money. This is the kind of decision my tax advisory work is built around: the answer comes before the transaction, not after it.
For the broader picture of first-year write-offs, my Section 179 guide covers how bonus depreciation and Section 179 work together for ordinary business property. If you are looking at a production deal, the first conversation is a 30-minute discovery call. The rules here are current as of October 2026.
More reading
Want to keep going?
Section 179 Deduction: A Florida Business Owner's Guide
A Florida CPA's guide to the Section 179 deduction, how it works, the vehicle and business-income limits, and Section 179 vs bonus depreciation.Florida Depreciation Rules: A Business Owner's Guide
A Florida CPA's guide to Florida depreciation rules: why pass-throughs owe no state tax and how the C-Corp bonus depreciation addback works.The One Big Beautiful Bill Act: What Changed for Small Business Owners
A Florida CPA breaks down what the One Big Beautiful Bill Act changed for small business owners: QBI, bonus depreciation, Section 179, tips, and 1099s.Frequently asked questions
- Can a film production really qualify for 100% bonus depreciation?
- Yes. Section 168(k)(2)(A)(i)(IV) makes a qualified film or television production, as defined in Section 181(d), eligible property for bonus depreciation, and it reads that definition without the Section 181 dollar cap or its expiration date. Under the One Big Beautiful Bill Act, a production acquired after January 19, 2025 qualifies for the permanent 100% rate. For a self-produced film, IRS regulations treat it as acquired on the date principal photography begins.
- When can I take the deduction for a film?
- In the year the production is placed in service, which for a film or TV production is its initial release or broadcast. IRS regulations define initial release as the first commercial exhibition or broadcast to an audience, and festival or test screenings do not count. A film that wraps in 2026 but does not commercially release until January 2027 is a 2027 deduction, no matter when the money was spent.
- What is the 75% test for a qualified film production?
- At least 75% of the total compensation paid for the production must be for services performed in the United States by actors, directors, producers and other production personnel. Participations and residuals are left out of the calculation, the people have to be physically present in the U.S. when they do the work, and U.S. territories do not count. For a TV series, only the first 44 episodes can qualify.
- Does Section 181 still apply to film productions in 2026?
- Not for new productions. Section 181(h) ends the Section 181 expensing election for productions commencing after December 31, 2025. That is why bonus depreciation now matters so much for film: Section 168(k) borrows the Section 181 definition of a qualified production but expressly ignores both the $15 million cap and that sunset date.
- If I invest in a film LLC, can I use the bonus depreciation loss on my own return?
- Possibly not, at least not right away. The deduction is claimed by the production entity and passed through to you, then it has to clear three separate limits on your return: the at-risk rules of Section 465 (film production is specifically listed as an at-risk activity), the passive activity rules of Section 469 if you do not materially participate, and the excess business loss limit of Section 461(l). A passive investor's share of the loss is generally suspended and carried forward until there is passive income to absorb it or the interest is sold.