J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

CHAPTER 21

Domestic Production Activities Deduction

Alert

At the time this book was printed, Congress had not extended numerous breaks for 2012 that had expired at the end of 2011. Check the online supplement in February 2013 at www.jklasser.com or www.barbaraweltman.com to see whether these breaks apply for 2012 returns.

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 such activities 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.

In this chapter you will learn about:

• Background to the new deduction
• Qualified production activities
• Figuring the deduction
• Special rules for pass-through entities
• Where to claim the domestic production activities deduction