Real Estate and Construction Newsletter December 2016
Deduct As Much as 9% of Taxable Income with DPAD
As 2016 comes to a close, business owners are working diligently with their accounting team to get an idea of what their tax situation will look like next April. You know the drill: accelerate deductions, delay income and make sure cash flow is sufficient to cover year-end expenses.
Often times, one of the last decisions made by business owners is determining their own bonus. For obvious reasons, the natural inclination for most is to maximize their bonus as payment for another successful year. When finalizing this analysis, it’s important to understand the indirect impact your bonus has on one of the most powerful deductions available to contractors, the Domestic Production Activities Deduction (DPAD).
DPAD was passed as part of the American Jobs Creation Act of 2004 and is a “non-cash deduction” equal to as much as 9% of taxable income. To be eligible to deduct the DPAD for construction work, a contractor must meet certain requirements.