A new study by Actors Equity shows working actors, entertainers and production crew may have to self-incorporate to avoid skyrocketing taxes under the new Republican plan, according to a story in The Hollywood Reporter Thursday.
The increase comes from the elimination of the deductions for union dues, agent commissions, classes and travel for those in the middle class, but keeps some of these provisions for “top-earning talent” due to a difference in how they file.
Those in the upper-earnings often form what is called a loan-out corporation, with the actor as an employee. Loan-out corporations will not see a change under the Republican plan.
But those who cannot afford the expense of self-incorporating — requiring attorneys and expensive paperwork to meet government requirements — say they depend on deductions to keep their taxes affordable.
The study finds working actors and entertainment professionals carry high expenses and often itemize both business costs and state and local taxes, since they tend to travel frequently and work in high-tax areas like Los Angeles and New York City.
The Republican tax plan would likely eliminate state and local tax deductions, or at least limit eligible deductions, and seeks to remove other deductions in the attempt to simplify the tax code and lower the overall rate.
The study finds, however, that even with the lower rate many working entertainers would pay more in taxes under the new plan. An actor making about $97,000 for example, currently pays $12,434 in taxes, but would pay $15,579 under the new law, according to the study.
Aside from self-incorporating, entertainers are looking at becoming independent contractors, rather than employees, so they would file a different tax form that the new bill does not touch. Many in the industry say this comes with its own set of risks since it depends on employers agreeing to higher them on as their own entity.
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