A Tax Break that is Actually Free

Tax credits and incentives usually come at a cost that is tied to some kind of increased spending for the taxpayer.  However, there is a tax incentive for “manufacturer’s” that is free.

It’s referred to as the Section 199 deduction (referring to the section of the Internal Revenue Code where the deduction is explained) and is a reduction to taxes that a manufacturer has to pay simply because the business makes or produces something.

The definition of “manufacturing” is very broadly defined as any type or size of company that manufactures, produces, assembles or fabricates goods in the United States.  The deduction is equal to 9% of a company’s “qualified production activities income” (as defined in the Code) or taxable income, whichever is lower.

It seems that most manufacturers are unaware of this deduction or are overlooking when filing their tax return, yet it is one of the simplest tax deductions to claim.

If you would like to find out more about the Section 199 deduction, please contact Michael J. Stevenson, CPA, CFF, CFE, ABV at mstevenson@claruspartners.com or 614-545-9100 x12.

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