IRC Section 199 deduction can provide a valuable tax break for businesses that perform domestic manufacturing and certain other production activities. Although the rules can be complex, a deduction of 9% of income from eligible activities can make the effort worthwhile.

Domestic Production activities include mining, oil extraction, farming, construction, architecture, engineering and the production of software, recordings and films. The deduction equals a percentage of the net income from eligible activities - 9% for years after 2009.

The amount of deduction for any tax year may not exceed the taxpayer's taxable income or, in the case of individuals, adjusted gross income. There is also a limitation of 50% of domestic production wages reported on Form W2. The deduction is designed to be economically equivalent to approximately a 3 percentage point reduction in the tax rate on eligible activities conducted in the U.S.

If you think you qualify, call our office to take advantage of this valuable tax deduction.

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