You don’t have to be a manufacturer to take the “manufacturers’ deduction”

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 AMT.

Contact us to learn whether this potentially powerful deduction could reduce your business’s tax liability.

Jon Bickerton
Jon Bickerton

Jon Bickerton is a Tax Shareholder and a member of the firm’s Science & Manufacturing, and Cost Segregation Segment Teams. He has over 10 years of public accounting experience managing many of the firm’s privately-held and not-for-profit tax engagements.