If you are a small business owner earning income in the state of Ohio, 2013 brought good news on the tax front. Starting in 2013, owners of pass through entities are now able to exclude half of their business income from the Ohio income tax. There are caps on the maximum deduction permitted, but it is a fairly large maximum – $125,000 for those filing as single or married filing joint and $62,500 if married filing separately.
What type of income qualifies for the deduction? Virtually all income earned from pass-through entities (S corporations, partnerships and LLCs) applies. Even sole-proprietors who report their income on their Form 1040, Schedule C will benefit from this new law. And if you are an owner who also receives wages or guaranteed payments – that applies as well. It is a pretty far-reaching benefit.
Claiming the deduction takes place through the normal tax return filing for individuals. A separate Form IT-SBD needs to be completed and included with the annual return. The permitted deduction is then used to reduce the individual’s total Ohio taxable income.
We at Harris, Burnett & Schmiesing CPAs have a great deal of experience assisting small businesses in the Central Ohio area. If you are a small business owner who has earned income in Ohio, we’d be happy to discuss with you how this new deduction will help your bottom line.