The Domestic Production Activities Deduction; An Often Overlooked Deduction for Manufacturers, Construction, Architects, Engineers, and other Domestic Producers

This deduction began in 2005, and is available for all businesses large or small. It provides tax relief for domestic producers to keep jobs in the US rather than shipping them overseas. The deduction applies to almost any business that manufactures, grows, extracts, produces, develops, or improves goods mostly in the United States.
 
It is a 9% deduction of your taxable net income as long as your domestic wages exceed that amount by 50%. We at Accounting Solutions Ltd., have specialized in the accounting and taxation needs of domestic producers for the past 27 years. If your current accountant has not taken this deduction, it may be time for a change. Contact us at you earliest convenience for a complimentary consultation.
 
Qualifying Activities
 
The law states that the only businesses qualifying for the deduction, must do work in the following fields:
 
– Manufacturing based in the US
– Construction performed in the US
– Electricity, natural gas, and potable water produced in the US
– Films & Videos with at least 50% of their production in the US
– Architectural or Engineering services performed in the US for domestic construction projects
– The disposition of tangible personal property, sound recordings or computer software created or developed in whole, or in part in the US
 
Deduction Limitations and Amounts
 
The 9% deduction against net income is subject to the following limitations
 
– The deduction cannot exceed 50% of the wages paid to domestic workers for domestic production
– The deduction cannot exceed your corporate income. If you show a taxable loss in any given year, this deduction cannot be taken.
– If you operate a Sole Proprietorship, S Corp, Partnership or LLC, the deduction cannot exceed the Adjusted Gross Income on your 1040.
 
In these difficult economic times, you deserve every tax break available. My firm has specialized in addressing the industry specific needs of Domestic Producers for the past 27 years. If you have any questions, please don’t hesitate to contact us. A complimentary tax planning session might save you a significant amount of money on your taxes.