Instructions for Form 8903, Domestic Production Activities Deduction

• Legal Form Number: 8903
• Year: 2018
• Issuer: Treasury Department
• Section: Treasury Department

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Instructions for Form 8903

(Rev. December 2019)

Domestic Production Activities Deduction

Department of the Treasury

Internal Revenue Service

Section references are to the Internal

Revenue Code unless otherwise noted.

Future Developments

For the latest information about

developments related to Form 8903

and its instructions, such as

legislation enacted after they were

published, go to IRS.gov/Form8903.

Future revisions of Form 8903.

The IRS will revise the December

2018 version of Form 8903 only when

necessary. Continue to use the 2018

version of Form 8903 for tax years

beginning after 2017 until a new

revision is issued.

What's New

Domestic production activities de-

duction (DPAD). DPAD under

former section 199 has been repealed

for tax years beginning after 2017.

Taxpayers using Form 8903 to

compute DPAD for tax years, or items

arising from tax years, prior to repeal

should use the Instructions for Form

8903 dated December 2018.

For specified agricultural or

horticultural cooperatives (specified

cooperatives), a deduction under

section 199A(g) for income

attributable to domestic production

activities is available for tax years

beginning after 2017. Specified

cooperatives may use Form 8903, as

applicable, to calculate the section

199A(g) deduction.

For further guidance, until final

regulations are published in the

Federal Register, taxpayers may

generally rely on the Proposed

Regulations (REG-118425-18),

published June 19, 2019, provided

the taxpayer applies the rules in their

entirety and in a consistent manner.

For purposes of the W-2 Wage

Limitation, also see Notice 2019-27,

2019-31 IRB, page 484 available at

IRS.gov/IRB/2019-31.

General Instructions

Purpose of Form

Use Form 8903 to figure your

domestic production activities

deduction (DPAD).

Your DPAD is generally 9% of the

smaller of:

1. Your qualified production

activities income (QPAI), or

2. Your adjusted gross income for

an individual, estate, or trust (taxable

income for all other taxpayers) figured

without the DPAD.

Reduced DPAD for oil-related

QPAI. A taxpayer with oil-related

QPAI also must reduce the DPAD by

3% of the least of the following

amounts.

•Oil-related QPAI.

•QPAI.

•Adjusted gross income for an

individual, estate, or trust (taxable

income for all other taxpayers) figured

without DPAD.

DPAD limited to wages paid. Your

DPAD generally can't be more than

50% of the Form W-2 wages you paid

to your employees that are properly

allocable to domestic production

gross receipts (including Form W-2

wages allocated to you on a

Schedule K-1).

Who Must File

DPAD for income attributable to

domestic production activities be-

fore 2018. Individuals, corporations,

cooperatives, estates, and trusts use

Form 8903 to figure their allowable

DPAD from certain trade or business

activities.

Shareholders of S corporations and

partners include information provided

by the S corporation or partnership

when figuring their allowable DPAD.

Beneficiaries of an estate or trust

include information provided by the

estate or trust when figuring their

allowable DPAD. Patrons of certain

agricultural or horticultural

cooperatives may be allocated a

share of the cooperative's DPAD to

include on Form 8903.

Married individuals filing a joint

income tax return figure the deduction

on one Form 8903 using the

applicable items of both spouses.

Note. Unless you were allocated a

share of a cooperative's DPAD or you

are a member of an expanded

affiliated group (EAG), you won't be

allowed a DPAD unless you can enter

on Form 8903 a positive amount for all

three of the following.

•Qualified production activities

income (QPAI).

•Adjusted gross income for an

individual, estate, or trust (taxable

income for all other taxpayers).

•Form W-2 wages you paid to your

employees. If you didn't pay any Form

W-2 wages (or have Form W-2 wages

allocated to you on a Schedule K-1),

you can't claim a DPAD.

For details, see the discussions of

these three items, later.

DPAD for income attributable to

domestic production activities af-

ter 2017. DPAD has been repealed

for tax years beginning after 2017.

Don’t use Form 8903 to claim DPAD

for 2018 or later years unless:

1. Your tax year began before

January 1, 2018,

2. You are a shareholder in an S

corporation or partner in a partnership

and the entity has a tax year that

began before January 1, 2018,

3. You are a beneficiary of an

estate or trust and the estate or trust

has a tax year that began before

January 1, 2018,

4. You are a patron of an

agricultural or horticultural cooperative

with a tax year that began before

January 1, 2018.

Specified cooperatives’ DPAD af-

ter 2017. For tax years beginning on

or after January 1, 2018, specified

agricultural or horticultural

cooperatives to which part I of

subchapter T applies may qualify for a

deduction under section 199A(g).

Dec 20, 2019 Cat. No. 39878Q