Business Income Tax Deduction

Business Income Deduction

 

Cutting Business Income Taxes

 

Virtually all businesses are now eligible for a 100% 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 and Senate Bill 208 continued the business income deduction to 2015 and forward.

For taxable year 2016 and forward, the business income deduction will enable a business owner who files single or married filing jointly to deduct 100% of business income up to $250,000 from the adjusted gross income they report on their Ohio personal income tax return. Married filing separate filers will deduct 100% of business income up to $125,000.  Any remaining business income above these thresholds will be taxed at a flat 3% rate.

Owners of and investors in businesses structured as sole proprietorships and pass-through entities (PTEs) qualify for this tax deduction. 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, originally Ohio's small business investor income deduction, was first effective for Ohio-sourced business income earned in taxable year 2013 and claimed on income tax returns filed in 2014. Beginning in tax year 2015 the deduction was expanded to include eligible business income from all sources regardless of where the income was earned.

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

 

Business Income Deduction Information

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