Article by 'Lizabeth DiSiena'
Starting with the 2015 tax year, favorable changes have been made to income taxes on sole proprietorships and pass-through entities. On June 30, 2015, Ohio Governor John Kasich signed into law the Amended Substitute House Bill No. 64 ("HB 64"). HB 64 enacts a number of beneficial tax changes and cuts for Ohio individuals and pass-through entity businesses.
HB 64 extends the Small Business Deduction (SBD) by gradually increasing the deduction for sole proprietorships and pass-through entities over the 2015 and 2016 tax periods. Such pass-through entities include S Corporations, partnerships, and limited liabilities companies taxed as partnerships.
In 2015, the SBD will now allow qualified entity owners to deduct 75% of their first $250,000 of business income from the Ohio Adjusted Gross Income (OAGI) reported on their Ohio personal income tax return.[1] In 2016 and beyond, small business owners will be able to increase the excluded amount to 100% of their first $250,000 of their business income from the OAGI reported on their Ohio personal income tax return. For both 2015 and 2016, HB 64 calls for no more than a flat 3% tax rate on business income in excess of the SBD.[2]
It is also worth mentioning that HB 64 also cuts individual income tax rates across the board by 6.3% beginning with the 2015 tax year. For example, the individual income tax rate for the highest income bracket will be lowered from 5.333% to 4.997%.
Both the increase in the SBD and the decrease in the individual tax rate are substantial cuts to the tax burdens on individual taxpayers and small businesses.
[1] During the 2013 and 2014 tax periods, the SBD allowed for a deduction of 50% and 75%, respectively, of a qualified entity owner's business income from the OAGI reported on their personal income tax return, up to $250,000.
[2] It should be noted that there are limitations on the SBD based on filing status.
__________________________
[1] During the 2013 and 2014 tax periods, the SBD allowed for a deduction of 50% and 75%, respectively, of a qualified entity owner's business income from the OAGI reported on their personal income tax return, up to $250,000.
[1] It should be noted that there are limitations on the SBD based on filing status.
SUBSCRIBE TO OUR NEWSLETTER!