The “Manufacturers’ Deduction”: It’s Not Just for Manufacturers

February 17, 2015

Yes, Section 199 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 for this powerful deduction.

The “Manufacturers’ Deduction”: Could Your Business Benefit from It?

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 us to learn whether this potentially powerful deduction could reduce your business’s tax liability when you file your 2014 return.

© 2015 Thomson Reuters/Tax & Accounting

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