Cutting Small Business Taxes
Virtually all small businesses in Ohio are now eligible for a 50 percent 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.
The small business deduction enables a business owner to deduct 50 percent of Ohio net 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 50 percent deduction is available on up to $250,000 in business income, meaning the deduction is capped at $125,000 for each investor or owner. The deduction cannot exceed the taxpayer's Ohio adjusted gross income (OAGI).
New for taxable year 2014 only, the small business deduction will enable a business owner to deduct 75% of Ohio net business income from the adjusted gross income they report on their Ohio personal income tax return. The deduction will be limited to $187,500 for individuals with a filing status of married filing jointly or single and $93,750 for individuals with a filing status of married filing separately. At this time, Ohio House Bill 483 authorizes the temporary increase in this income tax deduction for tax year 2014 only.
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 is first effective for income earned in taxable year 2013 and claimed on income tax returns filed in 2014.
For more information on this tax cut, please contact the Ohio Department of Taxation at 1-800-282-1780.
Small Business Deduction Information
Click here for Form (PDF): IT SBD – Small Business Investor Income Deduction Schedule
Click here for Instructions (PDF): Small Business Deduction Instructions
Click here on Income - Small Business Investor Deduction FAQs