The Domestic Activities Production Deduction

The Domestic Activities Production Deduction

With a number of manufacturing jobs going overseas, the federal government created
an additional deduction for manufacturers called the Domestic Activities Production
Deduction.

Originally the number of entities taking this deduction was smaller. As time
went on, tax authorities increased the activities qualifying for the deduction. The
number of taxpayers claiming this deduction has increased over the years.

For our clients, we look at the new products produced and services performed on new
products (including construction) versus services performed on existing products. The
entity is allowed a deduction of 9% of the qualifying income. This deduction can not be
more than 50% of your payroll, so you must make sure that you have payroll in order to
take this deduction.