The Ohio House is pursuing a significant change to Ohio’s Business Income Deduction currently benefiting owners of Ohio pass-through entities. The current Business Income Deduction provides great tax benefits for business owners; however, it is costing the state approximately $1 Billion in revenue. Proposed House changes would:
- Reduce the current $250,000 tax-free threshold for qualified income to $100,000 (This change would impact 14% of business owners)
- Eliminate the current 3% flat rate for business income beyond $250,000 in qualified income
- Make these changes retroactive to Jan. 1, 2019 (Impacts 100% of business owners now using the Business Income Deduction)
The intent is to use at least some of the funds to pay for across-the-board income tax reductions, including eliminating the lowest two tax brackets so that those earning up to $22,250 will not owe state income tax and reducing the top rate to around 4.6%.
The bill has been forwarded to the Ohio Senate and is awaiting revisions. Governor Mike DeWine has until June 30th to sign the two-year budget.
I If you would like to speak to one of our tax specialists for more information, please call: 1 (866) 760-0940 or send a note to Miranda.Hawk@brixeyandmeyer.com to setup a time to speak.