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Taxes: Don't forget your DPAD

3004 Views 3 Replies 3 Participants Last post by  kiteman
I assume everyone here in the trades is aware of the Domestic Production Activities Deduction (DPAD) for your business taxes. It amounts to a 9% reduction of your income for everything you produce. It was something I just stumbled upon about 6-7 years ago that has saved a fair amount on my taxes.

It is on line 35 of your form 1040 for SP's and S corps, and line 25 for C corps.
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I discovered it at about the same time, you just need employees to qualify.
Never heard of it. Last year was my first year with employees. What's the scoop?
If you're in construction, with W-2 wages, you are allowed a 9% reduction in profits before taxes.


QPAI equals domestic production gross receipts (DPGRs), reduced by cost of goods sold, and other deductions, expenses, and losses allocable to the receipts (Sec. 199(c)(1)).

As the name implies, DPGR applies to domestic operations and consists of:

Gross receipts from lease, rental, sale, exchange, or disposition of qualified production property (QPP) which was manufactured, produced, grown, or extracted by the taxpayer in whole or in significant part within the United States. QPP is normally tangible personal property, but it also includes computer software and sound recordings. It does not include land, buildings, or structural components.

Construction or substantial renovation of U.S. real property.

Engineering or architectural services for U.S. construction projects (Sec. 199(c)(4)).

DPGR does not include activities that are:

Exclusively sales of property; or

Exclusively services, with the exception of construction, engineering, or architecture.
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