Ohio’s state budget, passed in June 2013, included numerous changes to Ohio tax law, including the reduction of Ohio’s personal income tax and the creation of a deduction for Ohio sourced business income. On June 16 of this year, Ohio Governor John Kasich passed House Bill 483 (H.B. 483) as part of the 2014-2015 budget, accelerating the personal income tax rate reduction and expanding the deduction for Ohio sourced business income. Other changes enacted within the bill include an increase in Ohio’s personal exemption, an increase in Ohio’s earned income credit. Here is more explanation of the changes made:
INCOME TAX REDUCTION
As part of the 2014-2015 budget, Ohio passed a 10% reduction in its personal income tax rates, to be phased in fully in the 2015 tax year. H.B 483 accelerates the reduction which now becomes fully effective for the 2014 tax year.
PASS-THROUGH INCOME DEDUCTION
As part of the 2014-2015 budget, taxpayers receiving income from a pass-through entity were entitled to a deduction of 50% on income received from the pass-through entity, up to a maximum deduction of $125,000. H.B. 483 increases the maximum deduction to 75% of $250,000 of income received, or $187,500, from a pass-through entity.
PERSONAL EXEMPTION INCREASE
H.B. 483 increased the personal exemption for taxpayers with adjusted gross income of less than $80,000. The new personal exemptions are tiered as follows:
- AGI of less than $40,000-$2,200
- AGI of $40,001-$80,000-$1,950
- AGI over $80,000-$1,700
EARNED INCOME CREDIT
H.B. 483 increased Ohio’s earned income credit to 10% of a taxpayer’s federal credit. The previous credit was set at 5% of the federal credit.
There were other changes made as well to some of the credits available for historic building renovations and job creation credits. If you have any questions on how these changes impact you or your business please contact Holbrook & Manter today!! Our tax team is ready to answer your business and individual tax questions.