October 6, 2022

Tax Credit for a Movie? Is it Doable?

Lights, camera, action! Making a movie is not as simple as getting a few cameras and actors. It requires a lot of investment. Even low-budget, independent ventures can be hard to finance, especially when the expected returns are not predictable. It is hard to get a loan for such endeavors and even selling the distribution rights before the release can be difficult because investing in a movie is a major gamble. It is this uncertainty that makes film incentives, like film tax credits, so valuable. Securing a film tax credit can make or break a movie. 

What is Film Tax Credit?

As the name suggests, a film tax credit is tax deductible. A film Tax credit is in place to incentivize filmmakers to make the movie in a certain place. Each state has its own film tax credit schemes. So for example, California, Georgia, Kentucky, and Louisiana, have the best state film incentives in the form of tax credits. 

Allowing filmmakers to write off certain expenses as tax deductibles reduce the tax amount and bring down the cost of producing the movie. The film incentives, however, do not just benefit the filmmakers. States try to have the best state film incentives to attract filmmakers to their state as it leads to increased economic activity. Having a movie shot in a specific area leads to job creation. As a state begins to gain notoriety as having the best state film incentives, there is an influx of filmmakers rushing to benefit from the film incentives. The result is the creation of a fledgling movie industry concentrated in an area, as is the case with California, specifically Hollywood. 

There is a reason why so many movies are made in certain states and locations. Film tax credits are a major reason why some states become hubs for the movie industry.

As movie-friendly tax schemes attract filmmakers to a state, over time, the supporting infrastructure that the industry needs starts to develop as well. Aspiring actors, set designers, writers, camera crew, and other related professionals relocate i search of opportunities. There is an increase in economic activity. Aside from that, the area also gains a reputation, and since fame is such an integral part of the movie industry, the chances of the area becoming famous are also quite high. 

All in all, tax incentive given to films benefits all stakeholders. It decreases the cost of making a movie in a specific place, encouraging filmmakers to move to the area. This in turn increases the economic activity in the area. 

Do Film Tax Credits Help?

Film tax incentives can truly make a difference. Some states have a definitively better incentive scheme and this can play a vital role in determining where the film will be made. California, for instance, has a 25% tax credit for independent films that have a budget of at least $1 million. Similarly, other states have also followed suit and implemented similar incentives that filmmakers can benefit from.