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Ohio Small Business Income Tax Deduction

Cutting Business Income Taxes

Virtually all businesses are now eligible for a 75% tax deduction on the first $250,000 of business income on 2015 tax returns. The deduction was first effective for income earned in taxable year 2013 and claimed on income tax returns filed in 2014. 
The business deduction enables a business owner to deduct 75% of business income from the 2015 Ohio adjusted gross income (OAGI) they report on their 2015 Ohio personal income tax return. If the business has multiple owners, each is eligible to claim the deduction.  This 75% deduction is available on up to $250,000 of business income, meaning the deduction is capped at $187,500 for each investor or owner, with limitations based on filing status. The remaining business income will be taxed at a graduated rate up to 3%.
New for taxable year 2016 and forward, the business income deduction will enable a business owner to deduct 100% of business income from the adjusted gross income they report on their Ohio personal income tax return. The deduction will be limited to $250,000 for individuals with a filing status of married filing jointly or single and $125,000 for individuals with a filing status of married filing separately.
Owners of and investors in Ohio businesses structured as sole proprietorships and pass-through entities (PTEs) qualify for this new tax cut. 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. In addition to income flowing through from PTEs, if you are a 20% or greater owner, any compensation and / or guaranteed payments are eligible for the tax deduction. 

If you have any further question regarding your small business income tax deduction, please contact Elek & Noss CPAs at 440-926-9300.

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