Business Income Deduction FAQs

What is changing?What is business income?How can a taxpayer determine what income qualifies for the small business deduction or the business income deduction?What is nonbusiness income?Is the Business Income Deduction only available on Ohio-sourced business income?Is the Business Income Deduction only available to Ohio residents?Is the Business Income Deduction available to both entities and investors?How does the Business Income Deduction impact the calculation of school district income tax?How are the Business Income Deduction and the Ohio tax on business income calculated?Do taxpayers need to complete a separate IT BUS for each source of business income?If a taxpayer’s ownership percentage in an entity changed during the tax year, what percentage should be reported on Part 4 of the IT BUS?Should the IT BUS be included when filing the Ohio income tax return, form IT 1040?What amounts reported on federal Schedules B, C, D, E and F should be included on the IT BUS?Should business losses be reported on the IT BUS?If a taxpayer’s net business income from all sources is negative, do they need to complete the entire IT BUS?A taxpayer is a "statutory employee" for federal purposes receiving a form W-2 from a Limited Liability Company (LLC) that they do not own. They report this W-2 income on federal Schedule C, but do not pay self-employment tax. Can this income be included on the IT BUS?Should net rental income reported on federal Schedule E be included on the IT BUS?Should net royalty income reported on federal Schedule E be included on the IT BUS?Are rents/royalties received from the use of land for mineral rights eligible for the Business Income Deduction?If a sale of business property is treated as ordinary income on Form 4797 of the federal 1040, does this income qualify as business income to be included on the IT BUS? Would a capital gain arising from the sale of a business asset also qualify as business income?Are the federal deductions for self-employment tax, self-employed health insurance, contributions to SEP/SIMPLE/qualified plans and domestic production activities included as business income on the IT BUS?Are the Ohio Schedule A adjustments for section 168(k) bonus depreciation and section 179 depreciation expense included as business income on the IT BUS?Can investors in pass-through entities that file an Ohio IT 4708 composite return or an Ohio IT 1140 withholding return take the Business Income Deduction?How does Ohio treat compensation paid by a pass-through entity to an investor?Does the 20% or greater ownership requirement apply only to guaranteed payments and compensation or does it also apply to ordinary income reported on a K-1?What if a taxpayer holds a 20% or greater interest in the pass-through entity at the beginning of the year but holds less than a 20% interest at the end of the year?How should a part-year resident or nonresident allocate the Business Income Deduction on the Ohio form IT NRC for purposes of calculating their nonresident credit?How does the Business Income Deduction affect the Ohio Resident Credit taken by Ohio residents who have business income taxed by other states?Is interest income from a K-1 generally considered business income, available for the business income deduction? Does Ohio receive copies of Ohio IT K-1s that are filed and attached electronically or must these tax returns be paper filed?How do I report ownership percentage for a partnership where the primary and spouse are filing married filing jointly? Does a business have to be physically located in Ohio to be eligible for the business income deduction? Does reclassifying PTE wages as business income to a 100% owner disqualify those wages from the taxpayer taking the joint filing credit if it is their only source of income? Does the sale of an ownership interest in a business qualify for the Business Income Deduction? What if the sale is a "deemed asset sale" per IRC 338?