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Take aim at Section 199 manufacturing deductions

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in Small Business Tax,Small Business Tax Deduction Strategies

Did you fail to qualify for the Section 199 “manufacturing” deduction in the past? Don’t give up.

Strategy: If at first you don’t succeed … try, try again. A business taxpayer who didn’t meet the requirements in a prior calculation might do so on a 2010 return. Best of all, the maximum deduction reached its high-water mark in 2010, so it’s more valuable than ever.

Here’s the whole story: Initially, the Section 199 deduction was limited to 3% of the lesser of a taxpayer’s qualified production activity income (QPAI) or taxable income. The maximum deduction percentage was then doubled to 6%. It’s been increased to 9% for 2010 and thereafter.

QPAI is equal to domestic production gross receipts (DPGR) from qualified activities minus expenses. Expenses include the cost of goods sold allocable to the receipts, allocable direct and indirect costs and a ratable portion of other costs.

Production activities must be performed in whole,...(register to read more)

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