Ohio Tax Law Updates!
Sep 24, 2013
One notable change that this bill brings is a reduction to Ohio income tax rates, which is music to our ears! The overall income tax base rates and amounts are reduced by 8.5% in 2013, an additional .5%, or 9% in 2014 and then to a total of 10% in 2015. We will have another blog about the impact this will have on employees withholdings.
One of the biggest changes resulting from this bill is starting in taxable years beginning on or after 1/1/13, an individual filing an Ohio income tax return will be allowed a deduction amount to 50% of their Ohio small business income up to $250,000! Income from the taxpayer’s partnership, s-corporation, rental activity, or single member entity will be used to determine this deduction. An important thing to note is this deduction is not for an taxing school districts, only Ohio. More information will be coming from the bill on how to calculate this deduction.
There is also a change related to non-resident individuals involved in a pass-through entity. If that pass-through files an Ohio composite return and pays Ohio income tax, the individual can now file an Ohio return and claim the refundable credit for taxes the entity paid on the investor’s behalf.
Some other changes to come from the bill:
- Means testing for $20 personal exemption credit. Note: Will only be available to taxpayers with taxable income less than $30,000.
- Ohio earned income tax credit may be available to those filers who were also eligible for the federal earned income credit.
- Beginning in 2014 there will be an expanded definition for the deduction of military retirement pay.
- Any amount of $1 or less will not be refunded or owed on a tax return.
There are a lot of changes coming to Ohio in the next few years, so please make sure you keep up on them and make sure you understand how they affect you as an Ohio taxpayer. This is particularly important considering the time of year as we look towards year end planning.
By: Tara West, CPA, CMA