Top 10 Manufacturing Tax Incentives for 2021

The manufacturing industry makes up the backbone of the U.S. economy and, as such, there are many tax incentives aimed at helping manufacturers grow and thrive. Below, you’ll find 10 of these manufacturing tax incentives available to you in 2021:

Depreciation Expensing Under Section 179 and Bonus Depreciation

Manufacturers are allowed to expense up to $1.05 million in fixed asset additions under Section 179 if the total additions are less than $2.62 million each year. Section 179 expense is limited to taxable income and allows the taxpayer to select which assets to expense and how much. It’s important to note more states allow Section 179 than bonus depreciation.

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Debrief of the AICPA Global Manufacturing Conference

On Nov. 18, 2020, the AICPA held its annual Global Manufacturing Conference, a yearly gathering of CPAs and global manufacturing companies where industry trends are discussed. Like many conferences and meetings in 2020, things went virtual. While the schedule was reduced for remote delivery, the convenience and access to high value speakers made it one of best conferences in recent years.

I learned three takeaways from the conference concerning the economy, trade, and increased risks to the sector. I’ve summarized the key takeaways below.

Manufacturers Expect to Return to Pre-COVID Levels by the End of 2021

Dr. Chad Moutray, Chief Economist for the National Association of Manufacturers (NAM),

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Significant Tax Savings for Manufacturers and Distributors Under the Tax Cuts and Jobs & CARES Acts

This article was originally published in July 2019. It was updated in March 2021 to reflect new information available.

Under the Tax Cuts and Jobs Act (TCJA) and the CARES Act, manufacturers, distributors, and retailers can take advantage of substantial tax incentives for small businesses with average gross receipts of $26 million or less (for the three prior years). These incentives are especially applicable to small businesses with inventories.

The three incentives the TCJA makes for small businesses are:

  1. Allows the cash method for tax purposes,
  2. Treats inventory costs as non-incidental materials, and
  3. Exempts the business from the interest expense limitation.

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