A producer spends $28,000 making an EP. Studio hire, session musicians, engineering, mixing and mastering all sit in the project budget. Then somebody posts that the HITS Act lets musicians "get back up to $150,000."
That's not how it works.
The HITS Act did create valuable federal tax treatment for qualifying sound-recording productions. It did not create a grant, refund every studio invoice, or hand each artist a $150,000 tax credit.
And there's a complication that most summaries skip. The Section 181 deduction getting the publicity currently applies only to qualifying productions that commenced by December 31, 2025. A separate provision allowing 100% bonus depreciation may keep helping recordings begun and released later. That distinction is easy to miss — and it can change which tax year actually receives the deduction.
What the HITS Act changed
Until recently, the costs of producing a sound recording could have to be capitalized and recovered over time. That was awkward for independent creators, who might spend heavily on an album this year without knowing whether — or when — the recording would earn enough to cover its budget.
On July 4, 2025, Public Law 119-21 added qualified sound-recording productions to Section 181 of the Internal Revenue Code. Under that provision, a taxpayer may elect to treat eligible production costs as a current expense rather than putting them in a capital account. For sound recordings, the limit is $150,000 across all qualifying productions in the taxable year — not $150,000 for every single, EP or album — and the recording must be produced and recorded in the United States.
The Recording Academy describes potentially eligible costs as including studio rental, session-musician payments, producer and engineer fees, mixing and mastering, and certain equipment costs or rentals directly connected to creating the recording. Marketing, touring and distribution are excluded from its examples.
That sounds straightforward. The timing is where it gets sharp.
The $150,000 Section 181 window was brief
Section 181 currently says it does not apply to qualified sound-recording productions commencing after December 31, 2025. Because the HITS Act became law halfway through 2025, its immediate-expensing election created an unusually narrow window — KPMG's analysis describes it as applying to qualifying productions commencing in taxable years ending after July 4, 2025 and before 2026.
So, as the law stands in August 2026:
- A qualifying recording that commenced during the applicable 2025 window may be eligible for the Section 181 election.
- A project that began in 2026 generally cannot use that particular election.
- The $150,000 limit is cumulative for the taxpayer's qualifying recordings during the year.
- The election must be handled on a timely filed return, including applicable extensions.
- Revoking the election may require IRS consent.
This is the part that matters if you extended your 2025 return, are reviewing a return you already filed, or began a record in late 2025 and released it in 2026. The correct treatment depends on the dates, the ownership structure and the accounting method — not on the release date displayed on Spotify.
There's also proposed legislation, the CREATE Act, that would extend Section 181 treatment through 2030. As of August 6, 2026, that extension has not become law, and the Recording Academy is still campaigning for it. Worth watching, but not something to plan around as if it's already passed.
The longer-term benefit is bonus depreciation
The same 2025 law also made qualified sound-recording productions eligible for additional first-year depreciation under Section 168(k) — the part most short HITS Act explainers leave out entirely.
For this purpose, a qualifying recording is generally treated as acquired when principal recording begins; considered placed in service at its initial release or broadcast; and eligible if production commences in a taxable year ending after July 4, 2025. Crucially, unlike the temporary Section 181 window, the bonus-depreciation rule disregards Section 181's $150,000 limit and its termination date. The IRS confirmed this treatment in Notice 2026-11 and its updated guidance for the 2025 tax law.
The timing works differently, though, and that's the catch. Section 181 can potentially expense eligible costs as they're paid or incurred, subject to the election and the rules. Bonus depreciation generally enters the picture when the recording is placed in service — meaning its initial release or broadcast. For a recording financed in 2026 but not released until 2027, that difference could push the deduction into a later tax year.
There can also be reasons to elect out of bonus depreciation. A business with little taxable income today, for instance, might prefer a different recovery pattern. That's a decision for tax modeling, not a social-media checklist.
A deduction is not a $150,000 payment
Say an independent artist's business has $80,000 of taxable income before accounting for a qualifying $30,000 recording-production deduction. If the full deduction is available, taxable income may fall — but the artist does not receive $30,000 from the government.
The actual tax effect depends on the business structure, tax rate, other income, losses, state treatment, basis and a stack of other factors. And a deduction and a credit aren't the same thing: a deduction generally reduces the income subject to tax, while a credit generally reduces the resulting tax liability. The HITS Act changes the timing of eligible deductions. It doesn't make the recording free.
That may sound obvious, but "deduct up to $150,000" gets repeated constantly without anyone explaining what's being deducted from what.
Who can actually claim the costs?
The Recording Academy lists artists, songwriters, producers and labels among those who may benefit. But the decisive question isn't the job title — it's who incurred and capitalized the production costs, and who holds the relevant tax basis in the recording.
Picture a label paying a producer $10,000 under a work-for-hire agreement. The producer then pays musicians and rents a studio out of that fee. Both parties have expenses — but they can't both claim the same underlying production cost. Or take an artist who receives a recording advance: whether the artist or the label owns the resulting master, bears the cost and has basis in the production depends on the agreement and the accounting treatment.
So keep the contracts beside the invoices. A spreadsheet showing who moved the money is useful, but it may not settle who's legally entitled to the deduction.
Which expenses may qualify?
The statute defines a qualified production as a sound recording produced and recorded in the United States. It doesn't hand artists a line-by-line studio shopping list. The Recording Academy identifies these as potentially qualifying production expenses:
- recording-studio rental;
- session-musician payments;
- producer and engineer fees;
- mixing and mastering;
- equipment rental;
- certain equipment purchases directly related to production.
Costs further from the creation of the master need more caution. Artwork, publicity, advertising, playlist promotion, touring, merchandise, music videos and digital distribution are not automatically sound-recording production costs just because they support the same release. Equipment deserves individual review, too — a microphone bought for years of studio use may be its own depreciable asset rather than a cost assigned entirely to one album, and a computer used partly for music and partly for unrelated work raises another allocation question.
The rule of thumb: don't rename campaign spending "production" to make the budget fit the deduction.
What does "produced and recorded in the United States" mean?
Remote collaboration makes this messier than it looks. A vocalist records in Los Angeles. The producer builds the instrumental in London. Mixing happens in Toronto, mastering in New York. Is the finished master "produced and recorded in the United States"?
The statute doesn't give independent creators a percentage test for that situation — it just defines a qualified sound-recording production as one produced and recorded in the US. KPMG advises that the assets must be produced within the country to qualify under Sections 181 and 168(k), and that projects involving overseas recording, foreign production companies or distributed teams need fact-specific advice.
Practical move: keep the location of each session and service provider in the production file. An invoice that says "vocal production" without saying where the work happened may not be enough when the geographic qualification suddenly matters.
A practical example
Take a hypothetical independent label that began principal recording for an album in October 2025. It paid $35,000 in eligible US production expenses before year-end, continued work in early 2026, and released the album in May. Because production commenced during the relevant 2025 window, the label's tax adviser may consider a Section 181 election for qualifying costs paid or incurred under the applicable rules — and any eligible basis not treated under Section 181 may need to be evaluated under the bonus-depreciation rules when the album is released.
Now change one date: principal recording began in January 2026. The Section 181 election is generally unavailable under the current termination language. The recording may still qualify for 100% bonus depreciation when it's placed in service, assuming the production and the taxpayer meet the requirements.
Same studio. Same budget. Very different timing.
Build a tax-ready production file
For each recording project, keep:
- The production budget and final cost report.
- Dated studio, mixing and mastering invoices.
- Producer, engineer and session-musician agreements.
- Payment records — not invoices alone.
- W-9s and contractor information where required.
- Equipment receipts and notes explaining business use.
- Session dates and recording locations.
- The date principal recording commenced.
- The initial release or broadcast date.
- Master-ownership and recording-fund agreements.
- Records of advances, reimbursements and recoupable costs.
- A clean separation between production, marketing, video, touring and distribution expenses.
- The tax return and election statement connected to the production.
- Notes identifying which entity claimed each cost.
Distribution records can help establish the identity and release date of the finished master, so keep your ISRC, UPC, delivered metadata and original release confirmation with the financial records. Artists distributing through CREWPORT should still preserve invoices and tax evidence outside the delivery dashboard — distribution metadata can pin down what the recording is and when it came out, but it doesn't prove that an expense qualifies for federal tax treatment. Those are two different jobs, and only one of them lives in a distributor.
Don't spend money for the deduction
A tax deduction can improve the economics of recording. It can't rescue a project that never made business sense. Spending $20,000 purely to get a deduction still leaves you without most of that $20,000 — the recording has to justify the investment through its creative purpose, catalog value, release strategy or expected income. Use the tax treatment to plan cash flow, not to rationalize unnecessary gear or an inflated studio budget.
Before filing, hand a qualified US tax professional the production file and ask specific questions:
- When did this production legally commence?
- Who owns the tax basis?
- Which costs are production costs?
- Does the US requirement create a problem?
- Is Section 181 available?
- When was the recording placed in service?
- Does bonus depreciation apply?
- Should the business elect out?
- How does the treatment interact with losses, state taxes and the business entity?
The HITS Act is genuinely useful, and its biggest value is faster recovery of real production investment. But the headline number is only the beginning. The dates, the ownership and the paper trail are what determine whether the deduction actually reaches the person who paid to make the record.
FAQ
Can I really deduct up to $150,000 for my recording under the HITS Act?
The $150,000 is a Section 181 limit that applies cumulatively across all your qualifying productions in a taxable year — not per single, EP or album. It's also not a payment or a credit: a deduction reduces the income subject to tax. And the Section 181 election currently applies only to productions that commenced by December 31, 2025.
Is the HITS Act deduction still available for a record I started in 2026?
Generally not the Section 181 election, under the current termination language (productions commencing after December 31, 2025 are excluded). However, qualifying recordings may still be eligible for 100% bonus depreciation under Section 168(k) when placed in service. Timing and eligibility depend on the facts — confirm with a tax professional.
What's the difference between Section 181 and bonus depreciation here?
Section 181 can expense eligible costs as they're paid or incurred (subject to the election, the $150,000 limit and the 2025 window). Bonus depreciation generally applies when the recording is placed in service — its initial release or broadcast — and disregards Section 181's $150,000 limit and termination date.
Which recording costs qualify?
The Recording Academy points to studio rental, session-musician payments, producer and engineer fees, mixing and mastering, equipment rental and certain production-related equipment purchases. Marketing, advertising, playlist promotion, artwork, touring, merch, music videos and distribution are not automatically production costs.
What does "produced and recorded in the United States" mean for a remote project?
There's no percentage test in the statute. KPMG advises the assets must be produced within the country to qualify. Distributed teams, overseas sessions or foreign production companies need fact-specific advice, so document where each session and service actually happened.
Who gets to claim the deduction — the artist, the producer or the label?
Whoever incurred and capitalized the costs and holds the tax basis in the recording. The same underlying cost can't be claimed twice, and advances, work-for-hire terms and master ownership all affect the answer. Keep the contracts with the invoices.
Keep the evidence your deduction depends on
The HITS Act rewards a clean paper trail — dates, ownership and identity of the finished master. Your distribution records are one piece of that: what the recording is, and when it was released.
CREWPORT keeps your ISRC, UPC, delivered metadata and original release confirmation attached to every release, validated before delivery — a reliable record of the master to sit alongside the invoices and agreements your tax professional will actually need.
This article is general information, not individualized tax or legal advice. Tax law is fact-specific and changes; some provisions here are recent and proposals like the CREATE Act may or may not become law. Confirm your own situation with a qualified US tax professional before filing or making decisions.
Sources
- Public Law 119-21 — Section 70434, Qualified Sound-Recording Productions
- 26 U.S.C. §181 — Current Statutory Text
- IRS — Guidance on Additional First-Year Depreciation
- IRS Publication 946 — How to Depreciate Property
- Recording Academy — HITS Act Guide for the 2026 Filing Season
- Recording Academy — HITS Act Policy and Legislative Status
- KPMG — Expensing Opportunities for Qualified Sound-Recording Productions