J.K. Lasser's Small Business Taxes 2018

CHAPTER 21 Domestic Production Activities Deduction

1. Background
2. Qualified Producers
3. Figuring the Deduction

Alert

At the time this book was completed, Congress was considering important tax changes that could affect 2017 tax returns and planning for 2018. Check the online Supplement in February 2018 at www.jklasser.com or www.barbaraweltman.com to see what changes have been enacted and when they are effective.

How often does Uncle Sam reward taxpayers for simply doing a good job? There is a special deduction designed to encourage domestic production activities. Also referred to as the “manufacturer's deduction,” this write-off effectively slashes the tax rate applied to certain activities conducted within the United States and does not require any additional cash outlay to qualify.

There have been suggestions to eliminate this deduction entirely, as part of overall tax reform. To date, there have been no formal proposals, but stay alert for possible developments.

Background

In the past, there were 2 special tax regimes designed to assist U.S. companies doing business abroad: the domestic international sales corporation (DISC) and the Extraterritorial Income Exclusion Act. The World Trade Organization viewed these regimes as discriminatory in favor of U.S. companies, and the European Union was authorized to impose sanctions on U.S. goods. In response, these regimes have been replaced by a deduction for domestic production activities. The deduction does not require ...