The Healthier Home Studio Podcast

The US Goverment is giving your clients a DISCOUNT to make records with you?! 🇺🇸🎆🎇💰

• Chris Graham

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Download your free HITS Act Sales Guide to help you win more clients by teaching them about how the US Government will give them a "discount" on their next production, mixing, mastering, or recording project with you.

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Speaker:

welcome to the Healthier Home Studio podcast. This will be the best podcast episode you will ever get from me. It will be immediately useful and impactful in your business. Potentially the tune of thousands of dollars this month, not clickbait. This is not clickbait. I will never have an opportunity to help you grow your business faster than I will on this podcast episode. Let's get into it. Let's talk about the Hits Act and the$150,000 per year tax deduction that everybody in the United States is eligible for, for recording their own music. In a nutshell, recording studios are now tax shelters, but before we go any further, guys. i'm not a tax professional. I'm not a lawyer, and I'm definitely not your therapist. This is not tax advice. This is me a business coach explaining how this law works from a business coach's perspective, so you can ask smarter questions to the professionals, the CPAs, the lawyers, et cetera, et cetera, in your life. Don't sue me. Cool. Appreciate it. Okay, let's dig in. Here is what I would say to an independent musician who was thinking about hiring me to do literally anything related to making a record in 2025, and who is willing to pay me money for doing so? I would say, Hey, Mr. Independent musician, if you're spending money to make a record in 2025, you are getting a government backed discount when you hire me. Even if you're just an indie artist who's never made a penny or never will make a penny. From your music, you still get a discount from the US government for hiring me. Here's the kicker. Your mix engineer, your mastering guy, your producer, they're still gonna all get paid the same, but the IRS is gonna give you money back in your tax deduction at the end of the year if you have any normal ass job. let's do this project. Let's get you this tax discount. And oh, by the way, since the IRS has given you a discount, you said your budget was like 5,000, but like I did, I'm, I'm doing some math here and like honestly, if you spend, uh, You can hold a client's hand and explain your budget just got bigger. Every recording studio client from the United States, just got a bigger budget, and that is kind of amazing, Okay, let's dig into it. What is the Hits Act? Well, first of all, it was passed very recently here in the United States this year, 2025, and it lets artists, producers, and songwriters and studios deduct up to$150,000 in recording expenses immediately in the year that the money was spent. it functions like an effective discount for your clients. It covers studio time, it covers hiring engineers. It covers hiring producers, it, rentals, gear session musicians, meals, instruments, et cetera, et cetera, et cetera. Capital ETC. Okay. Before this, a hobbyist had to be profitable three outta five years. It's called the hobby law in order to deduct their expenses of making a record. Does that make sense? What a percentage of your clients make a profit three outta five years? For some of us it's none. Right? And so they're not getting a tax deduction in some cases, uh, for working with you. Right. And now they do. This is absolutely. A phenomenal thing that the US government has done, and it's okay to feel a little bit patriotic because this is awesome. I'm calling it, they saved the recording industry and probably the music industry too. This is going to result in so many projects for so many people. So. Let's dig into this a little bit more. First of all, we need to talk about a complicated subject so that you can understand how the discount that people get on their project depends on their income level. And their income level affects what's called their marginal tax rate. The US tax system is progressive. Your first few dollars are taxed less than your last few dollars. Federal Federal tax ranges fall somewhere based on your income level between 10 and 37%, and then you add your state and local taxes on top of that. Many people in our industry, many creatives are somewhere in like the 25 to 45% range. Right. That's how much they're actually paying in tax to federal, state, and local combined. So let's dig into this a little bit more. We're gonna talk about all the different marginal tax rates based on income levels. So I can give you guys some real examples. So first of all, if you make$50,000 here in the US, you're gonna pay about 25%. Marginal tax rate. If you make a hundred thousand, you're pay about 30%, 250,000, 40% marginal tax rate. Million dollars plus, that's like 45% marginal tax rate. So let's talk about how that actually works. Let's use an example project. Let's say that four different people hired you. They all paid you$5,000 to do something related to making a record. Let's say they're gonna mix, mix 10 songs. You charge$500 a song, they're paying you$5,000. Four different clients. One of the clients makes 50 a year. One of the other clients makes a hundred k, the next client makes 250 K. And the client after that, let's, let's say she's a high roller. Let's say she makes$5 million per year, right? The person who makes$50,000 is going to pay you$5,000, but they're gonna get$1,250 off because of the Hits act.

Speaker 2:

He,

Speaker:

let's say the person that. Is making a hundred thousand dollars a year, pays you$5,000. They get$1,500 off. The guy that's making$250,000 a year gets 2000 off. And the small business owning Queen that makes$5 million year. She's in the highest tax bracket year. She's paying a 45% marginal tax rate. She gets$2,250 off her$5,000 project with you. Does this sound kind of cool? Is this kind of interesting? Like, I'm sure it, like, I'm, I'm generalizing here, but we're in the ballpark. These numbers are not coming outta thin air, right? to be fully transparent, I asked Chris Graham, GPT, he's part of, uh, chat GPT, but he's like me, uh, on chat GBT. You can, you can uh, actually check'em out if you go into the GPT store on chat, GBT. If you're not sure to do that, ask chat. GPT.

Speaker 2:

Haha.

Speaker:

It's quite possible that not everything I am sharing with you is 100% accurate, but we're still figuring this out. Like there's not a lot of information out there. There's not even a lot of news source that's actually covering this right now. This is going to change the whole fucking recording industry. So many people are gonna start making recordings and it's gonna be beautiful. It's gonna be awesome. This incentivizes American citizens to make more records, and whether they hire American engineers or producers or whether they hire overseas, they still get the discount, which means even if you're in Italy listening to this and you're thinking, oh, I wish my clients from America, we get or$1,250 off for hiring me for 5,000 bucks, they do. It doesn't matter that you're overseas. What matters is that the client is paying us taxes. Okay, so let's dig into this a little bit more. Your, your clients will have to treat their music like a business. This deduction only works if they file like a business, not a hobby. They have to keep receipts. Track expenses and be ready to document what they spent and why. If you can help them do this, if you can find a way to help hold their hand here, you'll, you might end up doing it on every project, who knows? But this is something that I imagine is going to lower the friction for people who have thought about hiring you, who thought it's just a little bit too expensive. Uh, man, she's just a little bit outta my budget. Well. Maybe not anymore.'cause they're gonna discount Thanks Uncle Sam. But they need to file as a sole proprietor, like an LLC or an S Corp, whatever fits their life. They're gonna have to file taxes like a business to get this discount. Right. So the global studio impact. Is I think probably the most important thing here. Like I said, there's no rule in the Hits act that says that the expense on the recording must be spent within the us. It can be spent outside of the us. If you're in Antarctica and you only work with American customers, this affects you in the same way if you're in New York. Does that make sense? You can hire a mixer in Berlin, Germany and a mastering engineer in Canada both are still equally deductible. This is gonna ripple out globally because US artists now have way more incentive to make records and possibly export their spend to other countries. Okay. Very exciting. So let's talk about what this means for producers, mix engineers and studios. This makes it easier for clients to say, yes to hiring you. Your rates don't need to come down. The IRS is basically covering a chunk. Studios and freelancers, you guys need to educate your clients about this. Not only are you able to lower what they actually are paying, you might even be able to raise it. They might have, in their mind said, I can spend up to$5,000. Well, guess what? You're gonna get a tax rebate if you can spend 6,250. Still gonna cost you the same. You're gonna get your tax rebate, you know, in a while, but. Maybe you should spend a little bit more, maybe you should hire a real mastering engineer this time. I don't know. Just a thought. So this makes it easier for clients to hire you because the IRS is covering a chunk of every project that you work on. If it's from a US based client that is, and for a lot of, a lot of studios in, in the United States, that is the case. It's like 80, 90% are US based clients. It's difficult for international clients to hire US based studios right now'cause the dollar is very powerful. So like a Canadian hiring an American, it's really expensive for the Canadian, just kind of based on the exchange rate. I have some closing thoughts and a challenge to you guys. First of all, it's go time. The US government has saved our industry. They have given us an amazing opportunity to go out and to encourage American citizens to create records and get a tax incentive for doing that. Every indie artist should know about this, but most don't. If you are serious about making records this year, you need to get out and explain to every single person that you've ever worked with. Get your CRM out and just go through, Hey, I just wanted to let you know. If you decide to work with me again in 2025 or anytime in the future, if you're in the US you get a discount. And so if you want more information on this so that you can, you know, have these conversations with your clients, there's a link below. You can download a free PDF that I am. Gonna put together for you guys, and it's got like a little script in there. So if you're on the phone with a client, you can just sort of read through it and explain it and make sure you get all the facts right here. Um, but you can also use this to compose emails to all your past customers, text messages, et cetera, to encourage them, like, Hey, everything has changed. Who wants to work on music? Right? So this is pretty exciting. If you're an a creative audio professional, an engineer, producer, or a songwriter. You need to start talking about this with your clients, not because you're a tax expert, but because you are a professional and a record maker who loves their craft, who gives a damn. There are going to be phenomenal records that will be made only because the hits act removed, just enough friction to get things to move forward. Another example of of how this could be interesting is let's say, uh, you were going to work on a project,$5,000 for an individual from a very wealthy family, and you've been talking for months, you've been dragging on, you're not sure if it's gonna happen or not. He mentioned that his mom and dad might be interested in funding the project. You can now reach out to this individual, this US citizen, and say, Hey, guess what? Let mom and dad know that, uh, if they do decide to fund your project, it's a tax deduction for them up to$150,000. you an opportunity to reach out, which is amazing from a sales perspective. And it gives you an opportunity to say surprise, you get a discount, which is shocking, which will resonate with people. It is so surprising. The Uncle Sam wants to support

Speaker 2:

me making a record, and I'm proud to be an American where at least I know where I'm free. And I gotta finish this podcast episode because I really gotta pray and I, and I'll stand up.

Speaker:

Anyways. Oh, I'll missed that last note there. We'll fix that in post with some autotune. Anyways, guys, the end. Thank you for tuning in to the Healthier Home Studio podcast with your host, Chris Graham. Please share this with a friend. I don't think I'm ever gonna make a better podcast episode. Like you can turn around and you could close a multi-thousand dollar project later today with this information and the right opportunity and the right client that has been sitting on a fence, right? This is the ultimate Get clients off of fence. Sales technique. Click the link below in the description, download my free PDF guide to talking to your clients about the HITS Act. I think it is gonna be the most valuable single page PDF that you've ever downloaded in your life. It is free. Enter your email address. I'll send it right on over to you. I hope you enjoy it and I hope to talk to you soon. Have a great day. Record maker. You fucking got this. Go out there and close some sales. Yeah.