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What is a "tax write off"?
(lemmy.world)
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this post was submitted on 11 Feb 2024
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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
And it's probably closer to what's happening here. Probably something in their contracts state that certain financial obligations will be paid on the movie's release. But if the movie is never released they don't need to pay out.
But it sounds bad to come out and say "our contracts say we can get out of paying people if we don't release the movie so we aren't releasing the movie" rather than saying "we aren't releasing the movie because we can write it off on our taxes."
Sure in the past there were significant distribution costs in pressing out all those copies of a film and sending it out to theaters everywhere. Even direct to video has distribution costs. So "writing off" a movie to avoid paying those costs made sense when it was done in the past. But direct to streaming is basically just copying some files to a server, and a movie is basically guaranteed to recoup those costs. So the only reason to write off a movie and not release it is because of contract shenanigans.