Income Tax Reduction for Ohio Enterprises

Changes to the Ohio income tax law will give Ohio entrepreneurs a big tax reduction.

Ohio entrepreneurs will see a 6.3 percent tax reduction across all brackets.  The new top marginal rate now stand at  4.997 percent. The new rates are retroactive to January 1, 2015.

Small business owners, including investors in pass-through entities, experience a decline in the tax burden through an increase in the benefit of the small business deduction. For 2015, the deduction is 75 percent of Ohio apportioned business income up to $250,000.

The 2016 deduction is 100 percent of Ohio apportioned business income up to $250,000. Moreover, the excess Ohio business income is subject to only a 3.0 percent flat tax 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.

Sources:
Ohio Department of Taxation
Business Income Deduction FAQ

By Wendy Stewart