Ohio’s state budget, passed in June 2013, included numerous changes to Ohio tax law, including the reduction of Ohio’s personal income tax and the creation of a deduction for Ohio sourced income received from a pass-through entity. On June 16 of this year, Ohio Governor John Kasich passed House Bill 483 (H.B. 483) accelerating the personal income tax rate reduction and expanding the deduction for pass-through entity income. Other changes enacted within the bill include an increase in Ohio’s personal exemption, an increase in Ohio’s earned income credit. A summary of H.B. 483 can be found below:
INCOME TAX REDUCTION
As part of the 2014-2015 budget, Ohio passed a 10% reduction in its personal income tax rates, to be phased in fully in the 2015 tax year. H.B 483 accelerates the reduction which now becomes fully effective for the 2014 tax year.
PASS-THROUGH INCOME DEDUCTION
As part of the 2014-2015 budget, taxpayers receiving income from a pass-through entity were entitled to a deduction of 50% on income received from the pass-through entity, up to a maximum deduction of $125,000. H.B. 483 increases the maximum deduction to 75% of $250,000 of income received, or $187,500, from a pass-through entity.
PERSONAL EXEMPTION INCREASE
H.B. 483 increased the personal exemption for taxpayers with adjusted gross income of less than $80,000. The new personal exemptions are tiered as follows:
- AGI of less than $40,000-$2,200
- AGI of $40,001-$80,000-$1,950
- AGI over $80,000-$1,700
EARNED INCOME CREDIT
H.B. 483 increased Ohio’s earned income credit to 10% of a taxpayer’s federal credit. The previous credit was set at 5% of the federal credit.
CHANGES TO HISTORIC REHABILITATION CREDITS
H.B. 483 created a new category of credits for projects that rehabilitate a historic building and foster economic development in the surrounding area. A “catalytic project” must meet all current requirements of the historic rehabilitation credit and must foster economic growth within 2,500 of the rehabilitated building. Qualified projects are eligible for tax credits of up to 25 million dollars. The project must be approved by the state; currently a maximum of one project can be certified in any two-year budget cycle.
H.B. 483 provides that historic rehabilitation credits can now be claimed, temporarily, on a taxpayer’s Commercial Activity Tax return. Historically, these credits have applied to personal income, financial institutions, and insurance taxes. H.B. 483 included other minor changes related to hotel and property taxes.
For questions on how H.B. 483 may affect your Ohio taxes, please contact us.
