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The DPAD is repealed for tax years beginning after December 31, 2017 (generally 2018).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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Matt Eckelberg
I joined the firm in 1997 as an intern and since have advanced to partner. I have thorough experience in both audit and tax, and provide these services to commercial entities, individuals and profit-sharing 401(k) plans.

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