Making a Scene Presents – THE HITS ACT EXPLAINED FOR INDIE MUSICIANS (NO LAW DEGREE REQUIRED)

Listen to the Podcast Discussion to gain more Insight into the Hits Act

If you’ve ever finished a recording project, felt proud of the music, and then felt sick when you added up the studio bills, this article is for you. Recording costs hit indie musicians before the money comes in, sometimes long before. The HITS Act exists because lawmakers finally recognized that problem and tried to fix part of it.

This article is written only for US-based independent musicians. Everything here assumes you file US taxes and earn income in the United States. If you live elsewhere, stop here and talk to a local tax professional, because this law does not travel across borders.

I’m going to walk you through what the HITS Act is, how it works in real life, who it helps, where it can backfire, and how to use it without screwing yourself later. This is not hype. It’s a tool. Tools work best when you understand them.

WHAT THE HITS ACT ACTUALLY DID

The HITS Act stands for the Help Independent Tracks Succeed Act. In simple terms, it changed the US tax code so certain music recording costs can be deducted faster instead of being spread out over many years. Before the HITS Act, recording music could be treated like building an asset. That meant the IRS could expect you to deduct the cost slowly over time, even though you already paid the money upfront. That’s fine if you’re a giant label with cash reserves. It’s brutal if you’re an indie artist paying studio bills with gig money and a credit card.

The HITS Act fixed that by allowing qualifying musicians, producers, and music businesses to deduct up to 100% of eligible recording production costs in the year those costs are paid, up to a cap of $150,000. That does not mean free money. It does not mean the government pays for your album. It means you may reduce how much of your income is taxed in that year.

WHY THIS MATTERS FOR REAL MUSICIANS

Most indie musicians don’t fail because they’re lazy or untalented. They fail because cash flow kills momentum. You spend money now and hope income shows up later. The HITS Act helps line up expenses and income in the same year so taxes don’t punish you for creating. If you had a decent income year from gigs, teaching, licensing, merch, Patreon-style support, or even a day job, the HITS Act can reduce the tax hit when you reinvest that money into recording new music.

This is especially important for musicians trying to build a catalog. Albums and EPs don’t just generate income once. They keep working over time. The HITS Act doesn’t change how much money you make long term, but it can make surviving the short term a lot easier.

IS THIS A 2025-ONLY TAX RULE OR DOES IT CONTINUE?

This is critical, so read it slowly.

As the law is written right now, the HITS Act applies only to qualified sound recording productions that begin before January 1, 2026. That means 2025 is the final year under the current version of the law. This does not automatically mean the deduction disappears forever. Congress could extend it. Congress could change it. Congress could let it expire. No one knows yet.

What matters to you right now is this: if your recording project starts in 2025, it may qualify even if work continues later. If your project starts in 2026, it likely will not qualify unless the law is extended. The word that matters here is “start.” Not finish. Not release. Start.

If you care about using this deduction, you must be able to prove that production began in 2025. That proof usually looks like studio invoices, producer contracts, session musician payments, or dated files that show real work began. If you’re thinking, “I’ll just say it started,” stop. The IRS does not accept vibes as evidence.

WHAT COUNTS AS A “RECORDING COST”

The HITS Act is about producing sound recordings, not promoting them. That distinction saves people and burns people. Recording costs usually include studio time, engineer fees, producer fees, session musicians, editing, mixing, mastering, and equipment rentals used specifically for recording. If the cost directly helped create the recorded audio that becomes your master, it likely belongs here.

Promotion costs usually do not count under the HITS Act. Press photos, PR campaigns, ads, social media content, playlist pitching, distribution fees, merch, music videos, and touring are usually separate business expenses. They may still be deductible under normal rules, but they are not part of this specific deduction. Think of it like this. If the song didn’t exist yet and the expense helped make it exist, that’s production. If the song already existed and the expense helped people hear it, that’s promotion.

HOW THIS WORKS FOR SOLO ARTISTS

If you’re a solo artist filing taxes as a sole proprietor, usually on Schedule C, this can be very straightforward. You pay recording costs. You track them. You elect to expense them under the HITS Act on your tax return. Those costs reduce your taxable profit. That reduction affects both income tax and self-employment tax in many cases, which is why this matters so much to independent musicians.

The key requirement is that your music activity must look like a real business. You release music. You perform. You try to make money. You keep records. You don’t need to be profitable every year, but you need to show intent to earn income.

If music is treated as a hobby, deductions disappear fast.

HOW THIS WORKS FOR BANDS

Bands get tricky, not because the law is unfair, but because band finances are often a mess. The tax system wants to know who paid the cost and who owns the recording. If four band members casually split expenses through Venmo with no structure, the deduction becomes hard to claim cleanly.

The cleanest approach is when the band operates as a clear entity, like a partnership or LLC, and that entity pays the recording bills. The entity then claims the deduction. If one band member pays all recording costs and owns the masters, that person may be the one who claims the deduction, but that should match your internal agreements. If ownership and payment don’t line up, that’s where problems start.

This is not about control. It’s about clarity.

THE $150,000 CAP (AND WHY IT’S FINE FOR MOST INDIES)

The HITS Act allows up to $150,000 in qualifying production costs to be expensed. For most independent musicians, that is more than enough. If you’re spending more than that on recording, you’re already operating at a level where professional tax advice is mandatory anyway. Do not assume the cap resets per song. The conservative, safe assumption is that the cap applies to production costs per year. If you try to get aggressive here without guidance, you’re gambling with penalties.

WHAT A DEDUCTION REALLY DOES (NO ILLUSIONS)

This part matters because people misunderstand it constantly. A deduction reduces the income you’re taxed on. It does not refund the full amount you spent. If you spend $10,000 on recording and your combined effective tax rate is around 20%, that deduction might save you about $2,000 in taxes. That’s meaningful, but it’s not free money. The real power of the HITS Act is timing. You get the tax benefit now, when the expense hurts the most.

WHEN THIS DEDUCTION HELPS THE MOST

This deduction is most useful when you actually have income to offset. If you had a strong year from gigs, teaching lessons, production work, sync placements, or even a non-music day job, expensing your recording costs in that same year can keep taxes from draining your cash right when you need it most. It helps line up the money you earned with the money you reinvested, instead of letting taxes hit you at the worst possible moment.

On the other hand, if you had very little income, taking every deduction immediately may not do much for you at all. In some cases, it can be smarter to spread deductions into future years when you expect to earn more, so they actually reduce a real tax bill. This is why strategy matters more than hype. The HITS Act is not about grabbing a deduction just because it’s available. It’s about using it at the right time, in the right way, for your situation.

THE 2025-TO-2026 TRANSITION PROBLEM

This deserves special attention. If your project starts in 2025 and continues into 2026, documentation becomes critical. You want clear proof that real production work began in 2025. That means dated invoices, contracts, session files, or payments. Do not rely on memory. If your project does not begin until 2026, assume the HITS Act does not apply unless Congress extends it. Plan accordingly.

WHAT YOU SHOULD DO RIGHT NOW IF YOU WANT TO USE THIS

You do not need fancy tools, but you do need discipline. Create a folder for each recording project. Save every invoice and receipt. Track expenses clearly.

If you want simple bookkeeping, Wave is free for many small businesses at https://www.waveapps.com. QuickBooks is widely used at https://quickbooks.intuit.com. FreshBooks is another option at https://www.freshbooks.com. For receipt tracking, Expensify is common at https://www.expensify.com.

For filing, TurboTax at https://turbotax.intuit.com and FreeTaxUSA at https://www.freetaxusa.com both handle self-employed filers, though complex band structures usually benefit from professional help.

If you use distribution platforms like DistroKid https://distrokid.com, TuneCore https://www.tunecore.com, or CD Baby https://cdbaby.com, track those fees separately as distribution, not production.

If you use tools like LANDR https://www.landr.com for mastering, those costs may qualify as production depending on usage. Design tools like Canva https://www.canva.com are marketing, not production.

THE HOME STUDIO MYTH

The HITS Act does not magically let you deduct your entire home studio build as a recording expense. Gear purchases follow separate tax rules. Some gear can be expensed under other sections of the tax code, but that is not what this law is about. Renting gear specifically for sessions is closer to a production cost. Buying gear is usually treated differently. Mixing these up is how deductions get disallowed.

WHAT THIS LAW DOES NOT FIX

This law does not suddenly make recording music affordable or risk-free. Studio time still costs money. Musicians still have to make smart choices about how and where they spend it. The HITS Act does not guarantee that a project will be profitable, and it does not protect anyone from poor planning, overspending, or unrealistic expectations. It also does not replace the need for a real budget or basic financial discipline.

What it does do is fix a long-standing timing problem in the tax system that hit independent artists harder than almost anyone else. Musicians often spend money on recording long before they earn a dollar back from that music. The HITS Act removes part of that penalty by allowing creators to line up expenses and income more fairly, so artists are not punished by the tax code simply for investing in their own work.

WHY THIS MATTERS FOR THE INDIE MUSIC ECONOMY

The HITS Act quietly supports the idea of a real music middle class, not just a handful of superstars at the top. By easing the tax pressure on recording costs, it gives independent artists more breathing room to keep making music without getting crushed in the same year they take the financial risk to invest in themselves. That breathing room matters, because it’s often the difference between moving forward or having to stop.

When artists can afford to keep recording, the effects spread outward. More music gets released. More sessions get booked. Local studios stay busy. Engineers, producers, and session players get more work. Careers grow slowly but steadily instead of hinging on one big break or a gatekeeper’s approval. This kind of change isn’t loud or flashy, and it doesn’t go viral on social media. But it’s real infrastructure, and infrastructure is what actually reshapes an industry from the ground up.

FINAL REALITY CHECK

This article is meant to give you clarity, not a green light to throw caution out the window. The HITS Act is a useful tool, but it only works when it’s handled with care. If you’re spending serious money on recording, talk to a qualified tax professional before you make decisions that could affect your finances for years. If you’re in a band, make sure everyone is on the same page about who is paying for what and who owns the recordings. Misalignment there causes more damage than any tax mistake.

If you plan to use the HITS Act, document everything as if you expect to explain it to someone who knows nothing about your music but cares deeply about the paperwork. Keep receipts. Keep contracts. Keep clear records of when production started and what each expense was for. When used correctly, this law can help you continue creating without wrecking yourself financially in the process. When used carelessly, it can turn into a costly mess that wipes out any benefit you thought you were getting.

That’s the truth, straight up.

Disclaimer

This article is provided for general educational and informational purposes only. It is not intended to be, and should not be interpreted as, tax, legal, or financial advice. Tax laws and regulations are complex, change frequently, and can apply very differently depending on individual circumstances, business structure, income level, and location.

Nothing in this article creates a client–advisor relationship or should be relied upon as a substitute for professional guidance. Before making any tax-related decisions, taking deductions, filing elections, or structuring your music business based on the information discussed here, you should consult with a qualified tax professional, CPA, or tax attorney who is familiar with US tax law and the music industry.

Using this information without professional advice could result in errors, penalties, or unintended tax consequences.

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