The manufacturers’ deduction, also called the “Section 199” or “domestic production activities” 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 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.
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.
To learn whether this potentially powerful deduction could reduce your business’s tax liability when you file your 2014 return call your Frazer LLP tax advisor in Brea, 714.990.1040, or Visalia, 559.732.4135.
Be Sure to Deduct All the Mileage You're Entitled To
You probably know that miles driven for business purposes can be deductible. But did you know that you might also be able to deduct miles driven for other purposes? For the 2015 mileage rates and the rules surrounding the various mileage deductions click here.