1. Draw up a blueprint for manufacturing deductions
For the 2006 tax year, your business may be able to claim a Section 199 manufacturing deduction equal to 3 percent of the taxable income from its qualified production activities. (The deduction is scheduled to increase to 6 percent in 2007 and then to 9 percent in 2010.)
The annual deduction is limited to 50 percent of the W-2 wages paid during the tax year.
New rules issued earlier this year expand the deduction’s parameters. Example: It’s now easier to qualify for a manufacturing deduction if you engage in construction activities (see 7/24/06 issue).
Strategy: Try to wriggle under the definition of a “manufacturing” operation. Your tax pro can help you meet all the technical requirements in the law.
For instance, your ...(register to read more)