When most taxpayers sit down to do their taxes each year, it’s usually with a bit of aggravation and distain. However, for Ohio residents, there will be a welcome surprise in the form of lower tax rates and some new tax deductions and credits.
Individuals – Lower Rates
With the signing of House Bill 59, income tax base amounts and rates have been reduced by 8.5% for 2013 and will be reduced another .5% in 2014, and an additional 1% in 2015. Here are the new rates for 2013:
|Ohio Taxable Income||Tax Calculation|
|0 – $5,200||0.537%|
|$5,200– $10,400||$27.92+ 1.074% of excess over $5,200|
|$10,400 – $15,650||$83.77+ 2.148% of excess over $10,400|
|$15,650 – $20,900||$196.54 + 2.686% of excess over $15,650|
|$20,900 – $41,700||$337.56 + 3.222% of excess over $20,900|
|$41,700 – $83,350||$1,007.74 + 3.760% of excess over $41,700|
|$83,350 – $104,250||$2,573.78 + 4.296% of excess over $83,350|
|$104,250 – $208,500||$3,471.64 + 4.988% of excess over $104,250|
|More than $208,500||$8,671.63 + 5.421% of excess over $208,500|
Individuals – Small Business Income Deduction
House Bill 59 also enacted the 50% Small Business Income Deduction. For taxable years beginning on or after January 1, 2013, an individual taxpayer filing Form IT-1040 is allowed a deduction of 50% of the taxpayer’s Ohio small business income of up to $250,000 (maximum deduction of $125,000). The deduction cannot exceed $62,500 for each spouse filing separately. Net business income reported on the taxpayer’s federal 1040 Schedules C, E, and F less applicable deductions will be used in calculating the deduction. The deduction is only allowed for income that is apportioned or allocated to Ohio.
Individuals – Earned Income Tax Credit
Also new for 2013, Ohio has made available an Ohio Earned Income Tax Credit. The credit will be equal to 5% of the Federal Earned Income Credit, but it is non-refundable. See below for the income thresholds to see if you might qualify for the credit:
- $46,227 ($51,567 married filing jointly) with three or more qualifying children
- $43,038 ($48,378 married filing jointly) with two qualifying children
- $37,870 ($43,210 married filing jointly) with one qualifying child
- $14,340 ($19,680 married filing jointly) with no qualifying children
Individuals – Other Items
Other changes in Ohio for 2013 include means testing for the $20 personal exemption credit. The $20 exemption credit is only available to taxpayers with Ohio Taxable Income of less than $30,000 on either an individual or joint return. Also, taxpayers may not take the personal exemption credit if they are being claimed as a dependent on a federal income tax return of another taxpayer. Additionally, Ohio has a new form, IT Schedule S. This schedule is required for same-gender taxpayers who file a joint Federal return to separately report their federal adjusted gross income on their Ohio IT-1040.
Businesses – Jobs Creation Credit
On the business side of the aisle, effective September 29, 2013, the Technology Investment Tax Credit has been eliminated, but the Job Creation and the Job Retention tax credits are still available. The job creation tax credit is based on the state income tax withheld by the taxpayer for new jobs created as a result of new business investment in Ohio. The company seeking the credit must create at least 10 full time positions at 175% of the federal minimum wage rate and generate at least $660,000 annually in payroll over the first three years of the initial operations. Approval must be granted by the Ohio Department of Development for the project.
Businesses – Jobs Retention Credit
The job retention tax credit is available to large employers who retain full time positions within the state of Ohio. Approval for the credit must be granted by the Ohio Development Services Agency. The payroll requirements are similar to that of the new jobs creation tax credit except there must be at least 500 retained employees. In addition, a minimum capital investment of $20 million for non-manufacturing businesses and $50 million for manufacturing businesses is required.
For more information on these and other tax credits available to you, please contact one of our tax planning and preparation professionals.
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