On June 30, 2013, Governor John Kasich signed Ohio's new biennial 2014-2015 Budget Bill (House Bill 59) with a $62 billion budget. The law went into effect on July 1, however; there are different effective dates for the various provisions.
Highlights of the bill are outlined below:
Income Tax Rate Reduction:
• The individual income tax rates will decrease by 10% being phased in by 2015:
The highest marginal rate of 5.925% will be decreased to 5.333% by 2015.
• New income tax deductions for individuals who are sole proprietors or owners of a pass-through entity:
Individuals may receive up to a 50% deduction of business income included in federal adjusted gross income that is apportioned to Ohio. The maximum deduction is $125,000 (or $62,500 for married filing separately if both report business income). This is effective for tax years beginning on or after January 1, 2013.
Key points of the bill include an income tax rate reduction, changes to commercial activities tax minimum tax, increase in state sales tax, property tax, and credits and incentives.
• The minimum tax due for Commercial Activity Tax effective for tax periods beginning on or after January 1, 2014 has changed. The new minimum tax is based on a graduated scale:
Gross Receipts Minimum Tax
$1,000,000 or less $150
$1,000,001 to $2,000,000 $800
$2,000,001 to $4,000,000 $2,100
$4,000,001 or more $2,600
• The $1,000,000 exclusion and .26% tax rate remain unchanged.
• Effective September 1, 2013 the state sales tax rate will increase from 5.5% to 5.75%
• Sale of digital products such as books, music and videos will be subject to sales tax
• Marketplace Fairness Act Compliance provisions have been made in the bill with the intent that if Congress passes the Act, Ohio intends to conform. The Marketplace Fairness Act allows states to require sellers outside of the state (even those without substantial nexus) to collect and remit sales tax.
• The 10% and 2.5% property tax rollbacks may not be applied to new or certain replacement levies that become effective in or after tax year 2014. Property levies in effect in 2013 remain subject to rollbacks
Credits and Incentives:
• The InvestOhio credit will be offered in the next biennium. However, significant changes are being considered and announcements will be coming in the following weeks.
The information provided above is a highlight of the general changes in Ohio tax law.
Please contact Amy J. Gibson at Skoda Minotti with any questions on how the changes may impact you or your business. firstname.lastname@example.org or (440) 605-7153.