The Tax Cut and Jobs Act repeals the Domestic Production Activities Deduction (DPAD).

Prior Law

Through December 31, 2017

The Domestic Production Activities Deduction (DPAD) was a deduction allowed to manufacturers, contractors, farmers and other defined producers based on income, wages and other costs applicable to production. For 2017, the deduction was 9% of defined production income. Pass-through entities DPAD activity was allocated to owners of the entity.

New Law

Effective for tax years beginning after December 31, 2017

The DPAD is repealed for tax years beginning after December 31, 2017 (generally 2018).

Commentary

The DPAD was a benefit to producers that provided significant tax benefit. However, lower tax rates offset the loss of this deduction as do other deductions such as the extension of bonus depreciation.

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Doug Wendlandt
I began my career in public accounting in 1978 and became a certified public accountant in 1981. I worked at a public accounting firm for 25 years and then started my own practice. In 2010, Hawkins Ash CPAs acquired my firm in Marshfield and welcomed me as a partner. I am a member of the firm’s Tax Committee.

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