Tax Bites: The manufacturers’ deduction: It’s not just for manufacturers

The manufacturers’ deduction, also called the “Section 199” or “domestic production activities” deduction, is 9% of the lesser of qualified production activities income or taxable income.  The deduction is also limited to 50% of W-2 wages paid by the taxpayer that are allocable to domestic production gross receipts.

Yes, the deduction is available to traditional manufacturers. But businesses engaged in activities such as construction, engineering, architecture, computer software production and agricultural processing also may be eligible.

The deduction isn’t allowed in determining net self-employment earnings and generally can’t reduce net income below zero. But it can be used against the alternative minimum tax.

Contact Ryan Giolitto (rgiolitto@cdhcpa.com) to learn whether this potentially powerful deduction could reduce your business’s tax liability when you file your 2014 return.

Ryan Giolitto

Ryan Giolitto is a business consultant and advisor helping businesses and individuals focus on growing their business and wealth to fund a successful retirement strategy. Ryan is Manager of U.S. Tax and Financial Consulting Services at CDH, P.C. where he specializes in tax and financial planning for businesses and high net worth individuals. Ryan graduated from the University of Illinois in Champaign with a B.S. degree in Accounting and a M.S. degree in Taxation. Ryan is a licensed Certified Public Accountant (CPA) in the state of Illinois and a Certified Financial Planner (CFP®). http://www.cdhcpa.com
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