Domestic Production Activities Deduction

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DEFINITION of 'Domestic Production Activities Deduction'

A deduction against income derived from domestic manufacturing activities. The domestic production activities deduction is designed to encourage domestic production and production-related activities.

It is also known as the "manufacturer's deduction".

INVESTOPEDIA EXPLAINS 'Domestic Production Activities Deduction'

The type of domestic production activities that qualify for this deduction are fairly broad. Businesses that qualify for this deduction must complete Form 8903. The deduction cannot exceed the adjusted gross income of sole proprietors or owners of partnerships or Sub S corporations. It is also limited to 50% of W-2 wages paid to employees.

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