Section 168(k) Film Investment: What Investors and CPAs Need to Know

Film & Alternative Investing

By Yuri Rutman, Writer/Director & Producer, The Violinist (Filmdemand). Educational content only — not investment advice.

Section 168(k) is the Internal Revenue Code provision governing bonus depreciation — the ability to deduct a large percentage of a qualifying asset's cost in the year it's placed in service, rather than depreciating it gradually over its useful life. For film investors and the CPAs advising them, understanding its current form matters more than the general concept, because the rules have changed materially in the past two years.

The current rule

Current federal law permits 100% bonus depreciation for certain qualifying property acquired after January 19, 2025, reversing the phase-down that followed the 2017 Tax Cuts and Jobs Act. The result for any investor still depends on production qualification, basis, placed-in-service timing, entity allocations, passive-activity rules, and later guidance. CPAs should confirm the governing statute and current IRS materials rather than relying on a marketing summary.

What qualifies

Qualifying film and television productions have historically been addressed within §168(k) and related provisions for qualified production property; the specific mechanics of which costs qualify, and how a production must be structured to pass through the benefit to investors, are technical enough that this is not an area to rely on general summaries — primary IRS guidance and production-specific legal and tax structuring should govern.

Elections and timing

Taxpayers may have elections affecting bonus depreciation or cost recovery, but the available choice and its consequences depend on the property, tax year, entity, and applicable guidance. A CPA should evaluate those decisions against the investor's broader tax position rather than assuming the largest first-year deduction is automatically optimal.

What CPAs should flag for clients

First, confirm the offering's legal structure actually passes the deduction through to investors as intended — this depends on how the SPV or fund is organized, not just on the underlying property qualifying. Second, confirm the client's passive-activity status: a limited partner who doesn't materially participate in the production will generally be limited in using losses against non-passive income under Section 469, regardless of how large the §168(k) deduction is on paper. Third, remember state conformity varies — some states fully conform to federal bonus depreciation, others partially conform or require add-backs, which changes the real after-tax value of the deduction depending on where a client lives.

What this is not

Section 168(k) is not a tax credit, is not the same as proposals for a federal film production credit, and does not guarantee a positive after-tax outcome independent of whether the underlying investment performs. It's a timing and character tool layered on top of an investment that still needs to work on its own economic merits.

For CPAs building 2026 year-end planning conversations with clients who are considering — or have already made — a film investment, the practical checklist is: confirm the entity structure, confirm passive-activity treatment, confirm state conformity, and confirm the client understands this is current law, not a proposal, unlike the credit discussed in the next piece.

Educational information only. Not investment, legal, or tax advice, and not an offer to sell or a solicitation to buy any security. Any offering is made only to verified accredited investors through definitive offering documents. Film investing involves substantial risk, including total loss of capital. Statements about Section 168(k) reflect current law; statements about a federal 20% production credit refer to pending legislation that has not been enacted. Consult your own advisors.