Ohio Mid-Biennium Budget Bill Passed
Gov. Kasich signed legislation (H.B. 483) this week which made several changes to Ohio taxes. While not as ambitious as initially proposed, this legislation continues to reduce the tax burden on Ohio residents and business owners. The most noteworthy portions of the legislation relate to Ohio personal income tax and include:
- Acceleration of Ohio personal income tax reduction. The 10% reduction in Ohio’s personal income tax rates, which was to be completely phased in next year (2015), was accelerated such that the full reduction is effective for the 2014 tax year. Gov. Kasich has publically stated that he wishes to reduce the highest tax rate to less than 5%. After this reduction, only the top bracket, applying to adjusted gross income over $200,000, will be taxed at greater than 5%.
- The small business income tax deduction was included as part of the Budget Bill passed last June providing for a 50% deduction of the first $250,000 of business income from certain small businesses. The deduction was increased to 75%, increasing the maximum deduction to $187,500.
- Beginning with the 2014 tax year, the Ohio earned income tax credit is increased to 10% of the federal credit (previously 5%).
- Increased the personal exemptions for low-income taxpayers.
The Governor used his line-item veto power to strike provisions providing a tax break to private water companies and requiring the state to provide counties with businesses’ sales tax information.