Question

George operates a business that generated adjusted gross income of $250,000 and taxable income of $170,000 this year (before the domestic manufacturing deduction). Included in income was $70,000 of qualified production activities income. George paid $60,000 of wages to employees engaged in domestic manufacturing. What domestic manufacturing deduction will George be eligible to claim this year?A. $5,400B. $6,300C. $7,200D. $15,300E. $22,500

Answer 1

B. $6,300

Step-by-step explanation:

For computing the deduction for domestic manufacturing, we have to take the lower value of 50% of the wages paid or 9% of Quality production Activity income

So, the 50% of the wages paid = $60,000 × 50% = $30,000

And, the 9% of Quality production Activity income = $70,000 × 9% = $6,300

The lower value would be $6,300

Thus $6,300 would be the domestic manufacturing deduction