Production Deduction

I have always told my clients that deductions do not "fall" out of the sky, but the government has definitely pulled a rabbit out of the hat on this one.  You don't have to spend any money for this deduction if you qualify.  There are more details to this deduction, but I am just showing you the highlights.

Production Deduction

1. The Jobs Act provides a 9% (when fully phased in) deduction for domestic producers, by adding the new production deduction relating to income attributable to domestic production activities as follows:

• 3% for tax years beginning in 2005 and 2006;
• 6% for years beginning in 2007 - 2009;
• 9% for years beginning in 2019 and beyond.

2.  The deduction is available to any taxpayer with qualified production activities income.

 

3.  Calculating the deduction.  The deduction percentage is applied to the lesser of:

• The taxpayer's "qualified production activities income; or
• Taxable income (determined without regard to the U.S. producer deduction) for the tax year.
• The amount of the deduction allowable for any tax year cannot exceed 50% of "W-2 wages" for the year.