Business Income Tax Deduction

Business Income Deduction

 

Cutting Business Income Taxes

Virtually all businesses are now eligible for a 75% tax deduction on the first $250,000 of business income. This deduction is the centerpiece of a major tax reform package initiated by Ohio Governor John Kasich and approved by the Ohio General Assembly that produced the largest overall tax reduction in the country - $2.7 billion over three years. House Bill 64 amd Senate Bill 208 continued the business income deduction to 2015 and forward.

The business deduction enables a business owner to deduct 75% of business income from the Ohio adjusted gross income (OAGI) they report on their Ohio personal income tax return. If the business has multiple owners, each is eligible to claim the deduction.  This 75% deduction is available on up to $250,000 of business income, meaning the deduction is capped at $187,500 for each investor or owner, with limitations based on filing status. The remaining business income will be taxed at a graduated rate up to 3%.

New for taxable year 2016 and forward, the business income deduction will enable a business owner to deduct 100% of business income from the adjusted gross income they report on their Ohio personal income tax return. The deduction will be limited to $250,000 for individuals with a filing status of married filing jointly or single and $125,000 for individuals with a filing status of married filing separately.

Owners of and investors in Ohio businesses structured as sole proprietorships and pass-through entities (PTEs) qualify for this new tax cut. PTEs include: partnerships, Subchapter S corporations (S-corps) and Limited Liability Companies (LLCs). Income generated by the business and passed through to the owners/investors is subject to personal income tax. The deduction was first effective for income earned in taxable year 2013 and claimed on income tax returns filed in 2014.

For more information on this tax deduction, please contact the Ohio Department of Taxation at 1-800-282-1780.

 

Business Income Deduction Information

Click here for Business Income Deduction PowerPoint PPT

Click here for Business Income Deduction Form/Instructions PDF or PDF Fill-In 

Click here for Business Income Deduction FAQs