Lights, Camera, Tax Credit: How R&D Tax Credits Benefit Media & Entertainment Businesses

Behind every great entertainment and media experience is a layer of technology that makes it possible. From the cameras and software to the delivery platforms, each advancement requires experimentation, problem-solving, and technical expertise.

Many people do not realize that this type of work can qualify for federal and – if applicable –  state-level research and development (R&D) tax credits, valuable tax incentives that reward businesses for technological innovation. If your studio, production house, creative team, or engineering team is pushing technical boundaries, then you could be sitting on a wealth of tax savings.

What are R&D Tax Credits?

The Research credit (i.e., federal R&D tax credit) is a government incentive that rewards companies for developing or improving products, processes, or technologies. Many states, including Arizona, California, Hawaii, and New York, also offer state-level R&D incentives.

If you’ve ever tried to solve a technical problem in a way that was new to you by experimenting, testing, or prototyping, then you may qualify, regardless of whether you succeeded.

How Do R&D Tax Credits Apply to Media & Entertainment?

Innovation is fundamental to the media and entertainment industries. As both global technological capability and consumer demand increase, media and entertainment must be at the forefront of research and development to create experiences that are faster, sharper, more immersive, or more interactive than ever before.

Does your business:

• Invent new ways to shoot or edit footage, like creating proprietary camera rigs, experimenting with drones for aerial cinematography, or integrating new sensor technologies to improve image quality;
• Write custom software for post-production, such as automated color grading tools, advanced compositing algorithms, AI-driven editing assistants, or real-time rendering solutions;
• Experiment with motion capture, virtual reality (VR), or augmented reality (AR), including building custom mocap suits, refining facial tracking systems, or designing immersive interactive environments for film, television, or live performance;
• Improve sound design workflows or visual effects pipelines, including by developing faster rendering processes, building cloud-based collaboration tools for distributed teams, or creating automated asset management systems;
• Develop new sound design equipment, such as high-fidelity microphones, immersive audio-mixing consoles, or real-time spatial audio rendering tools;
• Create or improve content delivery systems, for example, by optimizing streaming platforms for lower latency, higher resolution, or adaptive bitrate technologies to improve the end-user experience;
• Innovate live production technologies, such as remote broadcast solutions, advanced camera switching software, or real-time graphics overlays;
• Design new archival or restoration techniques, such as using AI and machine learning to restore historical footage, upscale old media, or digitize analog assets with minimal degradation;
• Innovate new interactive experiences by gamifying storytelling processes, incorporating haptic feedback devices, or building cross-platform interactive apps for audience engagement?

If yes, then you may qualify for R&D tax credits.

How Do I Know if My Work Qualifies?

The Internal Revenue Service (IRS) applies a four-part test to determine whether an activity or R&D project qualifies for the tax credit.

Ask yourself if the following statements are true of your developments:

• Do they make something better or create something new?
• Do they rely on engineering, scientific, or technological principles?
• Was it unknown on day one whether you could succeed?
• Did they require testing and refinement to work?

If so, then you’re ready to explore R&D tax credits to maximize your tax savings and support your future innovation.

Next Steps

Schedule a free consultation with Randy Eickhoff, CPA, Acena’s Founder & Head Coach, for immediate assistance. We will help you plan strategically to get the most out of your taxes.

Register for our free monthly webinar, next on August 19, 2025: “Cracking the (Tax) Code for R&D.”

• This workshop provides one CPE credit for professionals who are keeping up with continuing education.
• Learn more about qualifying and documenting R&D activities for tax incentives.

Visit our Acena Events page to sign up for our newsletter and stay abreast of all upcoming events.

Follow Acena on LinkedIn and X for the latest updates on industry-specific incentives and tax policy.

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Edited by Laura Whittenburg, Sr. Senior Technical Writer at Acena Consulting. Photo courtesy of YoLaGringo on Flickr.