How has the Tax Cuts and Jobs Act affected the domestic productions activities deduction?
The Tax Cuts and Jobs Act has repealed the domestic productions activities deduction for taxable years beginning after December 31, 2017. The form continued to be available in Drake software through 2019 to allow for credits from activities that do not use a calendar year.
Beginning with the 2020 software, Form 8903 is no longer supported for federal Individual, Partnership, S-corporation, or Fiduciary returns due to the expiration of the Domestic Production Activities Deduction.
The form is still supported for certain corporate returns. Specified agricultural or horticultural cooperatives may still use Form 8903 along with Form 1120-C to compute the deduction allowed under Section 199A(g).
Any Section 199A(g) deduction passed out to an individual taxpayer related to their Schedule C, F, or Form 4835 should be entered on the PATR screen. If the Section 199A(g) was received as a beneficiary, shareholder, or partner, it would be entered on the K199 screen that is created for the applicable K1F, K1P, or K1S screen. In either case, select the relevant schedule in the For box, use the Multi-form Code box to indicate to which screen it applies, and enter all the information about the Section 199A(g) income in the applicable line(s). This information will be used on the Form 8995-A as a part of the taxpayer’s Qualified Business Income deduction for that activity (C, F, 4835, K1P, K1F, K1S).
Note: States that do allow this deduction may not be following Federal changes. The 8903 screen is still available in data entry in Drake19 and 20 for state purposes only in other return types.
In Drake20, the following note 746 will be generated in view mode for a return that contains data on screen 8903:
FORM 8903 IS NOT AVAILABLE FOR 2020 RETURNS: The Domestic Production Activities Deduction (DPAD) was repealed for tax years beginning after 2017. The entry screen is still available for any state that still computes a similar deduction. Form 8903 is no longer supported for federal 1040 returns. The DPAD, and Form 8903, were replaced by the Qualified Business Income Deduction (QBID) computed on Form 8995-A.
If the taxpayer received a Form 1099-PATR because her or she was a patron in an agricultural or horticultural cooperative, enter all of that information on screen PATR. The program will automatically compute the allowed deduction on Form 8995-A using Form 8995-A, Schedule D. If a DPAD deduction is passed out from an 1120-s or 1065 to the taxpayer who is a partner or shareholder, enter the necessary information on screen K199 on the three lines that reference “cooperatives."
For more information, see the Form 8903 Instructions