End of year Tax planning as a Filmmaker and Videographer
For most filmmakers, videographers, and video production company owners, taxes are the biggest expense they have each year.
I just had a long end-of-the-year conversation/tax planning session with my CPA and I wanted to share some of the info with you.
This is not financial advice for you, and I recommend you talk to your CPA or hire one for specific advice for your situation.
The first thing I do when I have a profitable year is to see if I can make any end-of-year investments that can help my business grow the following year. I’ve done with every single year for 15 years now.
Most of the time, this is investing in new equipment like cameras, lenses, lighting, and office equipment.
I sometimes even pre-pay for subscriptions such as Adobe for example.
I also make sure if I’ve hired any vendors that I pay them before the end of the year, so I can take that expense.
I never buy things that I can’t justify to grow the business through. I’d rather pay taxes than buy a camera that I won’t ever use.
Next, I pay out bonuses. This is another expense that can be deducted and a great motivator for your employees.
My next dedication is retirement. When I first started with retirement, I use a traditional IRA. The limit changes each year but it’s currently $6500 and it can be a complete write-off. You can also use a Roth IRA. This is not tax-deductible, but the money grows and can be taken out in retirement, tax-free.
Once my business grew, I started a Solo 401k and there is also a SEP IRA. These have a far higher limit.
For example, the Solo 401k this year has a combined limit of 61,000 which can be a tax write-off.
Home office expense deduction is another great tax write-off. If you use a portion of your house that is dedicated solely to your business, you can write it off.
Next, I look at my mileage and auto-related expenses. If you are a freelancer, this is a huge dedication, so talk to your accountant about that.
I also have a Health Savings Account. You need a high deductible health care plan for this and not everyone qualifies for this, but you can contribute $3600 and it’s a tax deduction on your personal return and the money grows tax-free if invested. This money can be used for medical expenses.
I usually also make a donation at the end of the year either in form of cash or donating equipment or office supplies.
Again, hire an accountant that is a CPA to get personalized advice.
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