The Domestic Production Activities Deduction.... An often overlooked deduction - Tax Tip of the Week #38

The Domestic Production Activities Deduction (DPAD) is a much overlooked deduction by business owners.This deduction is available to businesses that pay wages (W-2 wages) and meet one of the following requirements:

• Any lease, rental, license, sale, exchange, or other disposition of:
  • Qualifying production property which was manufactured, produced, grown, extracted by the taxpayer in whole or in significant part within the United States
  • Any qualified film produced by the taxpayer
  • Electricity, natural gas, or potable water produced by the taxpayer in the United States
• In the case of taxpayer engaged in the active conduct of a construction trade or business, construction of real property performed in the United Sates by the taxpayer in the ordinary course of such trade of business.
• In the case of taxpayer engaged in the active conduct of an engineering or architectural services trade or business in the United States with respect to the construction of real property.

In 2009, the DPAD is equal to 6% of the smaller of:

• Qualified productions activities income (QPAI)
• Taxable income figured without DPAD for the year

In 2010, the DPAD percentage will increase to 9%.This could be a very significant deduction for business owners and should not be overlooked.You might have some questions on this one... Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com. Rick Prewitt - the guy behind TTW...until next week.