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taxmap/pubs/p225-014.htm#TXMP0572aca5 Domestic Production Activities Deduction

Domestic Production Activities Deduction

You are allowed a deduction for income attributable to domestic production activities. You can deduct 3% of the lesser of your qualified production activities income or your taxable income (adjusted gross income for individuals) for the tax year. Your deduction is limited to 50% of the Form W-2 wages you paid for the tax year.

taxmap/pubs/p225-014.htm#TXMP7d1f39f9 Qualified production activities income.

The excess of your domestic production gross receipts for the tax year over your cost of goods sold and other deductions, expenses, or losses directly allocable to such receipts plus a ratable portion of other deductions, expenses, and losses that are not directly allocable to such receipts or another class of income is your qualified production activities income. This income is determined on an item-by-item basis.

taxmap/pubs/p225-014.htm#TXMP6ad9c8b8 Domestic production gross receipts.

Domestic production gross receipts include gross receipts from any lease, rental, license, sale, exchange, or other disposition of tangible personal property which was manufactured, produced, grown, or extracted by you in whole or in significant part within the United States.

Domestic production gross receipts do not include gross receipts from property leased, licensed, or rented by you for use by any related person. See Internal Revenue Code section 199(c)(7) for the definition of related person.

taxmap/pubs/p225-014.htm#TXMP3b818c44 Income from cooperatives.

If you receive a patronage dividend or qualified per-unit retain allocation from a cooperative which is engaged in the manufacturing, production, growth, or extraction in whole or in significant part of any agricultural or horticultural product or in the marketing of agricultural or horticultural products, your income from the cooperative can give rise to a domestic production activities deduction. This deduction amount is reported on Form 1099-PATR, box 6. In order for you to qualify for the deduction, the cooperative is required to send you a written notice designating your portion of the domestic production activities deduction.

taxmap/pubs/p225-014.htm#TXMP6dcd6ac2 More information.

For more information on the domestic production activities deduction, see the Instructions for Form 8903. Also, see chapter 16, Sample Return, for an example of how to figure the domestic production activities deduction.

Previous Page:  Publication 225 - Farmer's Tax Guide - Farm Business Expenses Next Page:  Publication 225 - Farmer's Tax Guide - Capital Expenses Use     to find additional instances of index items.