Discussion:Domestic Production Deduction
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Domestic Production Deduction
| 8 November 2005 | |
| Is this a deduction just for large corporations or can it be of help to a self-employed person, having 1 employee? I recently attended a tax school sponcered by the Il.University. This was one of the last items discussed and not much time was given to it. I have a several clients that have small businesses and have employees. One of them is a carpenter who does siding and home remodeling. I am wondering if his installation of these materials will quilify. Thank you Lkfordham 16:55, 8 Nov 2005 (CST) | |
| 17 November 2005 | |
| The American Jobs Creation Tax Act of 2004 created new code sec. 199 that provides a deduction for both corporation and individual business owners, effective for years beginning after 2004. The main beneficiaries of this deduction will be businesses that produce goods, develop software or construct property in the U.S. For tax years 2005 or 2006 the percentage is only 3%. Here are some of items not included as domestice production gross receipts. Sale of food or beverage prepared at a retail establishment. For this purpose, a retail establishment is real property leased, occupied or otherwose used by he taxpayer in its trade or business of selling food or beverages to the public at which retail sales are made. Therefore, a restaurant at which food and beverage are prepared, sold, and served to customers (or that offers only take-out food) is a retail establishment and not eligible for te production deduction. However, if the facility is only used to prepare food and beverage for wholesale sale, it is not a retail establishment and receipts woul be DPGR. A facility at which food or beverage are prepard (whether for human or non-human consumption) will not be treated as a retail establishment if less than 5% of the food or beverages that are sold at the facility during the tax year are retail sales. I know this is long, but this code section is very complex. (DPGR)= Domestic Production Gross Revenue | |
| 17 November 2005 | |
| I too attended the UIS tax school although the location in which I attended they went into a lot of detail. It is my understanding that the deduction is limited to 50% of W-2 wages (not 1099 pay). They went on to say that farmers will qualify, but after checking my client base I find that my farmer clients do not have employees. This deduction is not restricted to large companies, but is a larger deduction when there is larger payroll. I believe the contractor issue requires the production and not repair. I have basement contractors (new construction) that will qualify, but carpet layers will not. At least that is my understanding of how this works. I would have to conclude that those carpenters that do mostly remodling and repair would not qualify. | |
| 27 November 2005 | |
| It is computed on form 8903 which is available in draft form at irs web site - do search on "draft forms"
Do a dry run on it and you will see a business must have employees irrespective if other qualifications are met. | |
| 19 January 2006 | |
| I am confused about this new deduction. Are seeds qualifying property where the gross receipts of the business are from the retail sale of seeds to US growers purchased from US companies. What if seeds are purchased from foreign wholesalers and sold to US farmers? How about buying from US wholesalers and sold to foreign growers? Any help will be appreciated. | |
| 19 January 2006 | |
| I see no problem with the retail or wholesale sale of seeds grown in the United States. However, I see no way to get this deduction for seeds grown in foreign country. | |
| 20 January 2006 | |
| I am wondering how the Domestic Production Deduction applies to the typical self employed
farmer who may or may not have any employees. If the farmer raises small grains which are sold to local grain elevators and raises beef cattle which is sold at local livestock auction does he qualify for the deduction and what information is taken from the sch F to form 8903? | |
| 21 January 2006 | |
| The deduction is directly tied to W-2 Wages. Do W-2 wages paid to your employees through a leasing company count as your W-2 wages for calculating the deduction? | |
Kateherman (talk|edits) said: | 29 January 2006 |
| I'm getting conflicting reports on whether officer salaries qualify as wages for this deduction. they seem to accordiong to Notice 2005-14, but Lacerte issued a bulletin saying no and took them out of their calculation... Lacerte seems to think "common law employees" do not include officer, but the way i read it all W-2 wages are good. any opinions? | |
Don@boyers (talk|edits) said: | 30 January 2006 |
| In terms of the S corp financials, do people generally report this type of deduction on the corporate financials (which we use to compute stockholder distributions) or just leave it off and report it on the K-1? | |
Marymac503 (talk|edits) said: | 28 February 2006 |
| In regards to the Form 8903, Domestic Activities Deduction, is a newly built strip mall and or office bldg, eligible for this deduction? These bldg were not built for sale but for lease, which will happen in 2006 | |
| 10 March 2006 | |
| I have limited partnerships that own and lease self-storage units. Would they be eligible? What about if they were to purchase an existing facility and substantially renovate it before leasing? Would that make them eligible for the renovation year? | |
To join in on this discussion, you must first
log in.
