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Taxation in Entertainment
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Flashcards
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Qualified Performing Artist (QPA)
Special tax status allowing for the deduction of performance-related expenses for those meeting certain income criteria.
Section 181 of the IRS Tax Code
Allows a 100% deduction of audio-visual work costs in the first year of investment.
Agent and Management Fees
These costs can be deductible as business expenses for entertainers.
Travel Expenses
Deductible if related to the entertainment profession and considered ordinary and necessary.
Foreign Entertainer Tax (FET)
U.S. tax obligation on foreign entertainers and athletes on income they earn while performing in the U.S.
Depletion Allowance
Tax deduction recognizing the decreasing value of reserves for mineral, oil, or gas property.
Amortization of Production Costs
Distributing the cost of a production over its useful life or the period it generates income.
Entertainment Expenses Deduction
Prior to the Tax Cuts and Jobs Act (TCJA), certain costs for entertaining clients were deductible.
Net Operating Loss (NOL)
When eligible tax deductions exceed taxable income, it results in an NOL which can be carried forward or back to reduce taxable income.
In-Kind Income
Non-cash income received through the provision of services or sponsorship deals, which is still taxable.
Theatrical Investors' Tax Deduction
Allows investors in theatrical productions to deduct their investment from their income in the year the money is spent.
Merchandising Rights
Income from the sale of merchandise related to a performance or entertainer, which is taxable.
State and Local Tax (SALT) Deduction Limits
Under TCJA, an individual's combined SALT deduction, including state income and property taxes, is capped at
Hobby Loss Rule
Limits the deduction of expenses for activities not engaged in for profit, affecting entertainers with inconsistent income streams.
Self-Employment Tax
Consists of Social Security and Medicare taxes, primarily for individuals who work for themselves, including many entertainers.
Loan-Out Corporations
Personal service corporations where an entertainer can be employed, potentially reducing overall tax liability.
Electronic Sales of Digital Content
Income from online sales of music, movies, and books is taxable and may also be subject to sales tax laws.
Image and Likeness Rights
Entertainers must report payments for the use of their name, face, signature, and other aspects of their persona as taxable income.
Tax Credits for Production Companies
Many states offer tax credits to encourage local production, which can reduce the tax liability for qualifying companies.
Tax Treaty Benefits
Entertainers from countries with an income tax treaty with the U.S. may receive beneficial taxing rights, reducing or eliminating double taxation.
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