Due to stronger than expected state revenues discovered during the mid-biennium review, the Governor, along with the General Assembly signed into law additional tax relief for individuals and business owners effective for 2014.
On the personal income tax side, the following provisions have been signed into law:
- Next year's scheduled one percent income tax rate reduction is moved up, retroactive to January 1, 2014
- The administration is doubling the earned income tax credit from 5 percent to 10 percent of the federal credit. In addition, the state is increasing the personal exemption for taxpayers earning less than $40,000 a year from $1,700 to $2,200, and for those with income between $40,000 and $80,000 a year from $1,700 to $1,950
On the business side, for 2014 only, the personal income tax deduction on small business income will be increased to 75 percent, from the current 50 percent. The maximum deduction amount is 75 percent of $250,000 for taxpayers filing married filing jointly and 75 percent of $125,000 for taxpayers filing married filing separately.
Remember that this is a deduction for taxpayers owning businesses organized as sole proprietorships (including rental real estate) or pass-through entities on their Ohio apportioned income. The pass-through entities can include partnerships, S-corporations and limited liability companies.
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