$150,000 HITS Act Tax Break for Creators, What You Need to Know in Entertainment Law

If you have been seeing headlines about a $150,000 tax credit for independent creators under the HITS Act, read this before you start planning a massive studio spend. Understanding how this law works, and who it actually benefits, can save you from costly mistakes.

1. What is the HITS Act?

The HITS Act (Help Independent Tracks Succeed Act) allows qualifying music businesses to deduct up to $150,000 in sound recording production costs in the same year they are incurred. This is a change from the previous rules that required amortizing those costs over several years.

2. Who Really Benefits from the HITS Act?

While the HITS Act sounds like a huge win for every creator, it primarily benefits midsize music businesses, independent labels, sync houses, and production companies that spend $50,000 to $150,000 on projects.

The average independent creator does not spend anywhere near that amount on a single album or production. To get the full deduction, you must spend $150,000 and generate enough income to justify it.

3. Ordinary Expenses vs. Capital Expenditures

It is important to remember that ordinary business expenses such as marketing, travel, meals, and studio rentals have always been deductible, even without an LLC. The HITS Act specifically impacts capital expenditures for sound recordings, which are long-term assets. Your day-to-day operational costs remain deductible under the same rules as before.

4. Common Misconceptions About the $150K Tax Break

Some marketing around the HITS Act has been misleading, encouraging creators to hire top-tier mixers, mastering engineers, or songwriters simply to “take advantage” of the deduction. In reality, overspending in hopes of a tax benefit can quickly drain your resources. This law does not make it easier to deduct ordinary expenses and it does not apply to major record labels that exceed certain size thresholds.

5. How Creators Can Use the HITS Act Strategically

If you are considering leveraging the HITS Act, here are some best practices:

1. Work with a CPA and entertainment lawyer to confirm eligibility and plan strategically.

2. Track all expenses carefully to maximize legitimate deductions.

3. Consider forming an LLC for liability protection and cleaner financial records.

   
   

6. The Bottom Line for Creators and Entrepreneurs

Tax breaks can be powerful tools when used wisely. The HITS Act is a great resource for midsize production budgets, but it is not a magic solution for the average independent creator.

An informed legal and financial strategy will help you protect your budget, grow your business, and keep your creative projects sustainable.