Ohio Governor Kasich and the Ohio General Assembly have approved a new two year state budget that includes a $2.7 billion tax cut to Ohio businesses and individuals over the next three years.
This tax cut provides, among other things:
- A 10% personal income tax cut phased in over the next three years. In 2013, rates are being reduced 8.5%; in 2014, the rate cut is 9%; in 2015, the full 10% reduction is reached.
- Excluding from income tax 50% up to $250,000 (maximum exclusion of $125,000) of each owner or partner’s share in a pass-through-entity.
- Increasing the state sales tax rate from 5.5% to 5.75% effective September 1, 2013. Magazine subscriptions and digital products, including books, music, and videos delivered electronically, will be subject to tax just as they are if purchased or rented from a retail establishment.
- A new Earned Income Tax Credit will provide assistance for an additional 475,000 lower income households.
- The minimum tax will change from a flat $150 tax to a variable tax tied to the level of business receipts. The CAT rate of .26% and the $1million exclusion are unchanged.
- Suspending for three years the inflation-indexing adjustments of the income tax brackets and the personal and dependent exemptions.
- The $20 personal exemption credit will be available only to households with Ohio taxable income under $30,000.
- Motor fuel refineries and terminals will shift from the CAT to now pay a new Motor Fuels Receipts Tax at a rate of.65% effective July 1, 2014.
- The 10% and 2.5% ‘rollbacks’ (reductions) will be eliminated for new and replacement levies passed in November, 2013 and beyond. Existing levies and renewals are not impacted. The state subsidy payments to schools and other local governments will continue but will not increase if new local real estate millage is added.
- The homestead exemption will again become subject to means testing which will limit eligibility to home owners aged 65 years or older with incomes less than $30,000 beginning with applications for tax year 2014. Currently eligible participants will not be impacted.