Bonus Depreciation Now Covers Sound Recordings: What IRS Notice 2026-11 Means for Artists, Producers, and Labels
- 2 days ago
- 5 min read
Updated: 3 hours ago
New guidance from the IRS, Notice 2026-11, opens the additional first-year (bonus) depreciation deduction to qualified sound recording productions for the first time, and the timing rules could change how you plan and finance your next project.
Last updated: August 22, 2026
Quick answer:
Under Notice 2026-11, a "qualified sound recording production" (one produced and recorded in the U.S. that would otherwise qualify for the deduction under Section 181 of the Internal Revenue Code of 1986, as amended) can now claim the additional first-year depreciation deduction. The recording is treated as acquired on the date principal recording begins and placed in service at the time of initial release or broadcast. The rule applies to productions for tax years ending after July 4, 2025.
For recording artists, producers, production companies, record labels, and the business managers and entertainment attorneys who advise them, this is a genuine planning opportunity, not just a compliance footnote. How and when a project's costs are treated can materially change its tax position, and several of the key decisions need to be made before recording starts.
What Changed for Sound Recording Productions
The IRS issued Notice 2026-11 as interim guidance on how the additional first-year depreciation deduction under Section 168(k), as amended by the One Big Beautiful Bill Act, applies to sound recording productions. Before this guidance, sound recordings weren't treated as eligible property for bonus depreciation. Now they are, with specific rules for how the timing works:
Acquired date:
the date principal recording commences.
Placed in
service date:
the time of initial release or broadcast.
Effective date:
productions for tax years ending after July 4, 2025.
Each production stands alone:
every qualified sound recording production is treated as its own class of property, which means a taxpayer can elect out of bonus depreciation on a production-by-production basis rather than firm-wide or by default.
Section 163(j) interaction:
claiming bonus depreciation on a sound recording can affect the calculation of the business interest expense limitation, which matters for artists and labels carrying production debt.
Section 181 or Bonus Depreciation: You Generally Can't Use Both
Sound recording productions have had a separate deduction option for years under Section 181, capped at $150,000 per production annually. Section 181 allows taxpayers to elect to deduct the costs of a qualified production in the year the costs are incurred, rather than capitalizing and depreciating them over time. Notice 2026-11 doesn't eliminate that option, but it does force a choice for newer projects.
Section 181 Deduction | Bonus Depreciation | |
Annual cap | $150,000 per production | Election level |
Election level | Per production | Per production (can elect out individually) |
Productions commencing before Jan. 1, 2026 | Still available | Available, subject to the exclusivity rule below |
Productions commencing after Jan. 19, 2025 | Must choose one or the other | Must choose one or the other |
In practice:
For a production commencing after January 19, 2025, you cannot claim both the Section 181 deduction and bonus depreciation on the same recording. Which one produces the better outcome depends on the production's total cost, the taxpayer's broader tax position, and how Section 163(j) factors in. This is exactly the kind of decision worth modeling before costs are locked in, not after the return is filed.
Why This Matters, Whoever You Are in the Project
If you're a recording artist or producer: the ownership structure of the recording and the entity incurring production costs (you personally, a loan-out company, or another entity) determines who can even claim the deduction. That decision is usually made well before principal recording starts.
If you're a label or production company: because the acquired date is tied to when principal recording begins and the placed-in-service date is tied to release, the deduction can span a longer window than a single tax year. Multi-project slates make the production-by-production election particularly useful, since you're not locked into the same treatment across every recording you finance.
If you're a business manager or entertainment attorney: this is a development worth flagging to clients before they lock in financing or ownership terms on a new project, not after. Getting the entity structure and timing right from the start avoids having to unwind decisions later.
Questions Worth Asking Before Production Starts
Who will own the recording once it's finished?
Which individual or entity will incur the production costs?
When is principal recording expected to begin?
When is the recording expected to be released or broadcast?
Would this production do better under Section 181 or bonus depreciation, given its total cost and your broader tax position?
Is there existing production debt that makes the Section 163(j) interaction worth modeling first?
Don't Wait Until Tax Return Preparation
The most important decisions in this guidance, ownership, entity structure, financing, and the Section 181-versus-bonus-depreciation election, are far easier to make before a project starts than to unwind after it's finished. Once principal recording begins, the acquired date is locked in. Once you've filed a return claiming one treatment, changing course generally isn't simple.
If you're planning a new recording project, or you've already incurred significant production costs this year, this is the moment to have that conversation, not next April. Our entertainment industry tax and business management team can help you think through the details.
Frequently Asked Questions
Does bonus depreciation apply to every sound recording?
No. It applies to "qualified sound recording productions," meaning recordings produced and recorded in the United States that would otherwise be eligible for the Section 181 deduction.
Can I claim both Section 181 and bonus depreciation on the same recording?
Generally, no. For productions commencing after January 19, 2025, you must choose one or the other, not both.
When is a sound recording considered "acquired" for depreciation purposes?
On the date principal recording commences, per Notice 2026-11.
When is a sound recording considered "placed in service"?
At the time of its initial release or broadcast.
Can I opt out of bonus depreciation for one project but not another?
Yes. Each qualified sound recording production is its own class of property, so the election out of bonus depreciation can be made production by production.
How Schulman Lobel Advisors Can Help
Schulman Lobel Advisors works with recording artists, musicians, producers, entertainers, business managers, and entertainment companies on tax, accounting, and financial issues specific to the entertainment industry. If you're planning a new recording project or have already incurred meaningful production costs this year, our entertainment industry advisors can walk through how Notice 2026-11 applies to your specific situation.
About the Author
Rob Grubman, CPA is a Partner at Schulman Lobel Advisors with over 35 years of experience in public accounting. He advises music artists and producers, along with other entertainment, lifestyle, and fashion clients, on tax planning, business management, and corporate and partnership taxation. Rob is a member of the AICPA, the New York State Society of CPAs, and its Entertainment, Arts & Sports Committee, and has been named a Variety "Business Manager Elite" from 2020 through 2025.
This article is provided for general informational purposes and does not constitute individualized tax, legal, or accounting advice. The appropriate treatment for any specific production depends on its particular facts and should be discussed with a qualified advisor.
Comments