Submitted 10 months ago by tigerjerusalem@lemmy.world to [deleted]
I have this one movie that is finished that I spent 80 million to make. I decided to “write it off”. So when I get to pay my taxes, do I get a 80 million discount?
If you write off 80 mil you’re basically saying that you lost 80 million on an investment.
So let’s say a different movie you made makes 80 million, and this one lost 80 million, you basically made zero money and shouldn’t have to pay taxes.
So if I get this right: I lost 80 million by making this movie and shelving it. I made another movie that I spent another 80 million but made 40 million in profit. Then, instead of paying taxes for 120 million (the 80 million it made + 40 million extra) I’ll pay only over the 40? This would start to make sense about Warner Brothers…
A tax write off is also called a tax deduction.
So when you do your taxes and you need to pick between the standard deduction or itemized, that’s picking if you want to write off the standard amount or try to find all the amounts that might apply to you.
The deductions, or write offs, reduce your income for tax purposes. So if you have 50k in taxable income, a 10k deduction will mean you’re only taxed on 40k.
To get something you would call a discount, you would need a tax credit, which reduces the bill by some fixed amount.
10k write off: 100k income becomes 90k, 20% taxes are 18k.
10k credit: 100k income at 20% is 20k, less 10k credit is 10k is taxes.
Movie studios do complicated accounting to make it so the business that collects the money for showing the movie is often not the one that made the movie.
That means that often the movie is able to be described as a financial failure even though it made more money than it cost to produce.
Usually this isn’t done for tax purposes, because the IRS will generally get their cut regardless, since if the movie makes money, someone is collecting it.
Entertainment often pays actors, writers and such royalties based on a proportion of profits. By manipulating which specific entity actually shows the profit, they can manipulate how much royalties they have to pay.
Expense, not deduction. If you profited $100k on the sake of your house but had to spend $50k on repairs, you’ve only made $50k. The write off is subtracting the related expenses from income in order to calculate the actual profit
You clearly got your answer now, but I really wanted to see that Coyote vs Acme movie
How is that relevant?
You’ve got some answers as to what specifically it is, but I’d like to chime in and remind everyone that the US tax system is maliciously complex and designed to fuck over people like you and me and help the obscenely wealthy.
Overly simplistic and assuming you are talking about the US: So you spent 80M making a movie but for whatever reason it never makes it out of production, you never see any return on this investment. But overall this year you made 100M from something else. When you do your taxes, you can “write off” this 80M spent as a loss, so you only have to pay taxes on the remaining 20 million. It doesn’t deduct 80M from taxes owed.
A tax write-off is something that you ‘lose’ in order to offset what you owe in taxes. If you donate a car to a charity, you’ve losing the value of that car - because you aren’t selling it, and thus that value ‘lost’ gets calculated against what you owe the government.
Going to add to this, the confusion comes from people saying something is a tax wire off as being a good thing. That confusion comes from the fact that a tax write off is essentially a "discount" compared to paying for something out of your own pocket post tax. You're essentially buying it for whatever percent cheaper you tax rate is. This is good if it's something that you gain value from, but bad if it's something like a wasted investment (though that gets complicated when you start actually assigning percentages to an investment's potential return as you hedge it, that's so far outside of my wheelhouse that it might as well be on the moon).
Here you go: en.m.wikipedia.org/wiki/Hollywood_accounting
BartyDeCanter@lemmy.sdf.org 10 months ago
A write off is a colloquialism that refers to reducing your effective taxed income. A more realistic example would be, let’s say you make $250k, but you’re self employed and spent $50k on business expenses like a car and office space. Then you can write off that $50k and only pay taxes like you made $200k.