In this video, I describe the advantages of a little-known tax deduction that smart Certified Public Accountants have used to save their clients’ money. Learn the ins and outs of this deduction to see if you qualify.
The Domestic Production Activities Deduction, also known as the DPAD, is not very well publicized, but it is one of my favorite tax deductions. Now you may say, “Well, I'm not a manufacturer. I don't make widgets. So, what does that have to do with me?” Well, I'm going to tell you what it has to do with you. This deduction is available to any business who either makes something or builds something in the United States and who employs United States workers to do so. This deduction was introduced by the IRS in 2001 but has been somewhat overlooked over the years. I have found this deduction to be an incredibly useful tool for a lot of clients of mine as a way to capitalize on the expenses they're already incurring as a result of running their businesses.
Now you may say, “I don't manufacture anything. I don't have an assembly line or a factory. I don't build things.” Well, you might not realize that you do. For instance, compounding pharmacies. You don't think of them as being manufacturers. But they're manufacturing drugs every day for resale. You may not think of a company that sells gift baskets to be a manufacturer. But they are manufacturing gift baskets by pulling various components together and reselling the finished product. Consider construction.
You may say, “I'm not out there swinging a hammer. I'm only an architect.” Well, you're part of the construction process; an integral part of it in fact. Therefore, you will qualify under the domestic production activities deduction. Plus, what's so awesome about this deduction is that there are no extra costs that you have to incur. It's based on money you're already spending.
I have had tremendous results with my clients claiming this deduction and have greatly reduced their tax liabilities by a deploying this deduction.
DPAD often gets overlooked because people don't think of themselves as being constructors or manufacturers, or they were never asked the right questions.
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