Here’s a deduction most people don’t know about, and you don’t have to spend one dollar more to get it!
- It’s called the Domestic Production Activities Deduction (or Section 199).
- Any company who “makes things” in the United States can take it.
- It’s generally 9% of your net income in your business {but no more than half your payroll. } This is reduced to 6% for oil-and-gas related businesses.
- Define “Make things”:
1 – Manufacture – includes taking any raw materials and making them into something else. (Note: We use this for a catering company who makes sandwiches for private schools!!! – but it isn’t allowed for restaurants)
– – also includes CONSTRUCTION of real estate AND anything related to construction such as services by an ARCHITECT, ENGINEER, ELECTRICIANS, PLUMBERS or even the GENERAL CONTRACTOR!!!
2 – Produce – Software development, a movie, a dentist making crowns and bridges,
3 – Grow – landscaping companies who grow their own plants
4 – Extract – extract oil and gas or other minerals (but limited to 6% of net income).
You can amend prior tax returns up to 3 years back to get this deduction.
Example:
I have a remodeling company that nets $300,000 per year. As an S Corporation owner, this puts me into the 33% tax bracket. Without spending another dime, I can take an $27,000 deduction under DPAD. This saves me $8910. - GET CREATIVE!! If you think you qualify, give us a call at Finch CPA Firm, 281-379-1040.
