Tax break for sound recordings in Trump’s big bill could offer boost to New Mexico’s media industry

As many New Mexico residents, organizations and industries grapple with what President Donald Trump’s mega budget bill means for them, New Mexico’s film industry appears relatively untouched.

“It’s very minimal,” said Cyndy McCrossen, film liaison for the Albuquerque Film Office. “Nothing to write home about.”

Though minimal, there is an addition to the bill that had one local artist and business owner buzzing with excitement when he saw it.

The legislation adds qualified sound recording productions to the list of tax deductions covered by Section 181 of the Internal Revenue Code — a tax provision that allows filmmakers and investors to deduct certain production costs from qualified film, television and live theatrical productions.

Now, musicians and producers can deduct up to $150,000 of the costs associated with making a new sound recording, such as an album or a song, in the same year that they spend the money, versus deducting the expenses over many years. This allows these artists to “fast depreciate” their work expenses — a phrase common in the tax world — and see tax benefits right away.

“I think it’s pretty fantastic,” said Jason Wolf, owner and chief engineer of TripleTone Audio Post, an Albuquerque post-production music and recording studio that provides sound mixing services to the music and film industries.

The addition’s greatest implications are for the local music and sound production industries, Wolf and McCrossen said.

“This is sort of a boon to musicians who have never really recovered from the pandemic and have been asking for something like this for a long time,” McCrossen said. “This will help give some tax relief to recording artists.”

Tax relief is a major focus of the federal budget bill — known as the “One Big Beautiful Bill Act” — officially signed into law by Trump on July 4.

The controversial budget bill will cut taxes and increase funding for border security and defense, while making cuts to social programs such as Medicaid and the Supplemental Nutrition Assistance Program.

The Congressional Budget Office predicts the bill will swell the country’s deficit by trillions over the next 10 years and leave millions of people without health care coverage, but Republicans and the White House dispute those outlooks.

“I don’t necessarily agree with the rest of the surrounding stuff that came along with this (bill), but looking at (this tax benefit) in its isolated form, I think it’s a great thing,” Wolf said.

Wolf said the Section 181 tax provision has benefited filmmakers and investors for years and that the inclusion of sound recordings now “levels the playing field” for musicians and recording artists, allowing them to “treat their creations as a viable business tool.”

The addition has the potential to benefit film if used strategically, Wolf said. For example, if a filmmaker decides to tackle the music portion of a project separately from the film portion by commissioning a musician to create a soundtrack for the film, that is an expense that both the filmmaker and any investors of that standalone music project would be able to write off.

The tax benefit works out particularly well for Wolf, who is also a film producer and musician. Wolf said he and his rock band, SpitFireFly, recently recorded an original soundtrack for a film that he helped produce called “No Place.” Wolf said both projects will be eligible for the new tax benefit.

Wolf said the cap of $150,000 is more than enough, especially for independent local artists. The typical cost range Wolf sees artists spend on recording, mixing and mastering services is anywhere between $2,500 to $25,000.

McCrossen said the benefit of deducting those expenses in the year they occurred will be “super helpful” and create better cash flow for artists.

Wolf plans to share the new benefit with both his music and film clients, as he also does with New Mexico’s film tax incentives, which include a base tax credit of 25% and up to 40% based on a variety of factors. Wolf said these types of incentives and benefits are a big part of how he attracts projects and serves his clients.

Wolf noted there are likely parameters and boundaries yet to be explored, such as the tax benefits’ implications for podcasts, audiobooks and other types of sound recordings.

According to the legislation, a qualified sound recording production is a sound recording produced and recorded in the United States. The legislation uses Section 101 of Title 17 of the Copyright Act’s definition of sound recording, entailing “works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work.”

The provision ultimately will broaden taxpayers’ ability to expense certain costs, according to the U.S. House Committee on Ways and Means.

“I think it’ll be a stimulus to the creative industries,” Wolf said.

This story has been updated.