Domestic Production Activities Deduction - Form 8903

The domestic production activities deduction, often called the manufacturer’s deduction, is a tax deduction that individuals involved in domestic manufacturing can claim against the income they obtained from such activities.

The DPAD’s central purpose is to promote the manufacturing of goods domestically. The deduction generally amounts to no more than 9% of the income derived from those production activities that qualify.

The list of activities that are eligible for the deduction is broad and extends beyond manufacturing to the leasing, rental, licensing, sale, or exchange of goods involved in the domestic production of such items as films, electricity, computer software, architectural services, and agricultural goods.

Note that the income obtained from the sale of food and beverages at retail establishments, or from the lease, sale, etc of land, or from the distribution of electricity or natural gas does not qualify.