Changes In Ohio Taxes Beginning In 2013

Ohio Governor John Kasich on June 30, 2013 signed Ohio House Bill 59, which made significant changes to Ohio taxes.  

Individual Income Tax Decrease

 Individual income tax rates will be cut 10% over three years.

The $20 personal exemption credit will be available only to taxpayers with Ohio taxable income under $30,000.

Sales Tax Increase

Effective September 1, 2013 Ohio’s sales and use tax rate will increase to 5.75% (from 5.5%)

Minimum Commercial Activities Tax (CAT) Increase

The Commercial Activity Tax (CAT) was previously $150 on the first $1 million in annual gross receipts, regardless of total annual gross receipts. The CAT tax on the first $1 million will now vary depending on the taxpayer’s total annual gross receipts. The new minimums are as follows:

• $1 million or less in annual gross receipts – $150
• From  $1 million to $2 million in annual gross receipts – $800
• From $2 million to $4 million in annual gross receipts – $2,100
• More than $4 million in annual gross receipts – $2,600

Please note that the above apply only to first $1 million in annual gross receipts. Receipts over $1 million will continue to be taxed at a 0.26 percent rate.

 Small Business Income Deduction

There is a new tax deduction for small business income starting in 2013. The deduction will be the lesser of $125,000 ($62,500 per spouse if filing separately) or 50% of the small business income includable in federal adjusted gross income.

 The deduction will apply to sole proprietors as well as to investors in passthrough entities.

The deduction will not be available to trusts and restates.

 New Ohio Earned Income Tax Credit

New for 2013, the new credit will be equal to 5% of the federal tax credit.

New Sales Tax on Downloads

Beginning in 2014, sales tax will apply on downloads of music, books and videos.