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Tuesday
Apr262005

Tax Relief For You

You may be able to take advantage of tax relief that you may not even know applies to you.

Are you a manufacturer? If so, you can take advantage of a new tax deduction for manufacturers. If not, you may still qualify for the tax deduction.

The US Chamber of Commerce recently briefed me and members of its Small Business Council on the wide application of this new deduction. They have given me permission to share the article copied below with you.

Perhaps you will be able to take advantage of this recent tax deduction.

Alan

Tax Relief for Small Business
Deduction Applies to More Than Manufacturing

A new tax deduction for manufacturing applies to more than just nuts and
bolts. It pertains to capital improvements of many kinds—if you build
something, you can deduct part of the taxable income that it generates.

The deduction is part of the American Jobs Creation Act of 2004, which was
signed into law on October 22, 2004, by President Bush, and is intended to
encourage domestic production and the growth of jobs.

Landscaping activities, as well as wholesale food production, software
development, music production, construction or substantial improvements to
residential and commercial property, the building of roads and
communications facilities, among others, may qualify.

"Congress is generous in how it applies this deduction to domestic
production," says Giovanni Coratolo, the U.S. Chamber's director of small
business policy. In order to provide the benefits of this provision to a
variety of activities, lawmakers extended the relief to a number of
items—manufactured, produced, grown, or extracted.

"The IRS now allows a deduction of up to 3% for the lesser of two
activities: the qualified production activities income of the taxpayer, or
the taxable income of the taxpayer," Coratolo adds. The deduction begins at
3% for 2005 but rises to 9% by 2010. The most important stipulation is that
the production activities subject to the deduction must occur on U.S. soil.

The U.S. Chamber worked hard to obtain enactment of this law. Prior to the
law's passage, the Chamber secured the right of various business entities
to take the deduction, including sole proprietorships, partnerships,
subchapter S corporations, and limited liability companies. The Chamber is
currently drafting comments on proposed guidance to better address the
needs of small businesses.

"Remember, it's important to check with your accountant before using this
deduction," warns Coratolo. "As we all know, the tax code is never simple."

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