Performing on stage or in front of the camera might not get the pass-through deduction, but actors could still get the break on income from merchandising, licensing and side projects such as cookbooks, vineyards and perfume and clothing lines. Or big-name actors might bargain for ownership stakes in projects, giving them a slice of the tax benefits enjoyed by studios and investors.
A producer and director, meanwhile, might sign a contract to deliver the product of a film or TV show—rather than their artistic services. “It may change how contracts are written,” said Stephen Landsman, a CPA and tax partner at Squar Milner.
One drawback for the Hollywood elite in the tax law: Many are likely to get hit by the $10,000 limit on deductions for state and local taxes. And moving from a high-tax state such as California may not be the easy answer. State tax collectors can be aggressive about disputing those who claim they’ve changed residency—especially when they have strong professional links to their former locations.
The typical performers don’t have to worry about the $10,000 deduction cap. And they typically don’t make enough money to justify setting up a loan-out corporation: consistent annual earnings of at least $100,000. The estimated 43,500 actors in the U.S. earn a median wage of $17.49 per hour—and few work full-time.
Todd Cerveris and his wife are New York-based actors who sometimes spend half of the year on the road performing. They expect to pay as much as $7,000 more in taxes this year because of lost deductions.
“It effectively becomes a tax for trying to be an actor,” Cerveris said in an interview from Cincinnati, where he was working on the premiere of a new play. “I’m not trying to make a killing, but I am trying to make a living, and that’s getting harder and harder.”
This article was provided by Bloomberg News.