Build a case for manufacturing deduction — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Build a case for manufacturing deduction

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Q. We’re a construction company that specializes in fire-and water-damaged homes. Typical jobs consist of gutting residential homes and rebuilding. Our accountant told us that we wouldn’t qualify for the new manufacturing deduction because it only applies to new construction. Do you agree? L.S., Cincinnati

A. Not necessarily. Plenty of confusion still surrounds the application of the new Section 199 manufacturing deduction, but the deduction isn’t strictly limited to new construction. For this deduction, construction activities include new construction or substantial restoration of real property performed in the United States. Real property consists of residential or commercial buildings, permanent structures, permanent land improvements and infrastructure (e.g., roads, sewers, sidewalks and power lines). Certain technical requirements must be met. We suggest that you seek a second tax opinion from an expert in the field.

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