On May 9, 2019, Ohio’s House of Representatives passed House Bill 166 by a vote of 85-9. This is a two-year state budget bill that, if passed in it’s current form by the Senate and signed by the governor, will make several significant changes to Ohio tax law.
The House Bill, in its current form, would represent an overall tax cut for Ohio taxpayers; however, the cut is more of a tax “shift.” This is because the cut would be facilitated by major tax hikes for Ohio’s business owners who derive income from pass-through entities (for example: owners of partnerships and “S Corporations”). Ohio business owners would lose many tax breaks they currently enjoy, including:
- Reduction of the maximum deduction for business income from $250,000 to $100,000;
- Elimination of the state’s 3% flat income tax rate on pass-through income which exceeds those deduction amounts;
- Modifies eligibility requirements for several income tax credits so high-income taxpayers who earn little non-business income would be ineligible.
The aspects of the House Bill which will result in tax reduction include:
- Elimination of the bottom two of Ohio’s seven marginal tax brackets for state income tax, resulting in exemption of income up to $22,250;
- Reduction by 6.6% of each of the remaining five marginal tax brackets;
- Expansion of existing sales tax exemption for equipment and supplies used during production of dairy products. This exemption will be expanded to include production or processing of any food for human consumption;
- Exemption from sales tax for any supplies or janitorial services used to clean manufacturing machinery.
We will be monitoring the progress of this bill and providing updates as developments occur.
If you want to discuss how your tax situation may be impacted by this law, let us know here, and we’ll connect you with a team member at no charge, or let us know by calling 513-241-8313.