Small Business Owners Receive 50% Deduction for Ohio Personal Income Tax

Last year’s budget bill added a 50% deduction for Ohio personal income tax for small business owners up to $125,000. R.C. 5747.01(A)(31). This broad deduction applies to business income created by nearly all Ohio small businesses, regardless of form, including S corporations, limited liability companies, partnerships, and sole proprietorships. All small business owners (Ohio residents, part-time residents, and non-residents) are entitled to the deduction, as long as they have business income sourced to Ohio. Further, the full deduction may be claimed by multiple owners of the same qualifying business, although limited to $125,000 per taxpayer even if he/she owns multiple small businesses.

The Tax Commissioner’s recent Alert to All Ohio Small Businesses provides further details on this deduction, which is claimed on Part I.D. of Form IT SBD.