Ohio Taxes Reduced: Small Businesses & Flow Throughs
If you are an owner of a small business in Ohio, you just received a reduction in your personal income tax obligation! Good news also if you receive income allocated on a flow through basis, or if you are a 20% owner of a flow through and receive guaranteed payments.
The Ohio budget bill, effective June 30, 2015, reduces your Ohio tax liability for 2015 and provides even greater savings for 2016. The final version of the bill:
- Reinstates for 2015 the expired 75% deduction of the first $250,000 of Ohio sourced business income;
- Increases the deduction in 2016 to 100% of the first $250,000;
- Applies all of your personal and dependent exemptions against other income; and
- It also charges a flat tax of 3% on Ohio sourced business income over the $250,000 threshold. In 2014 the top Ohio rate was 5.333%.
It is all part of the "Blueprint for a New Ohio" broadening the tax base in some areas, such as collection of use taxes from out of state vendors, and providing incentives to keep and attract small businesses in Ohio, creating jobs, and modernizing Ohio's approach to funding its budget.
Sometimes a guaranteed payment to a less than 20% owner of a flow through can be restructured to qualify for this deduction. Let us know if you would like to explore this, other related planning opportunities or if you have questions regarding these changes. Please contact Gary M. Harden.