Business Income Deduction
Ohio taxes income from business sources and nonbusiness sources differently on its individual income tax return (the Ohio IT 1040). The first $250,000 of business income earned by taxpayers filing “Single” or “Married filing jointly,” and included in federal adjusted gross income, is 100% deductible. For taxpayers who file “Married filing separately,” the first $125,000 of business income included in federal adjusted gross income is 100% deductible. This is commonly referred to as Ohio’s Business Income Deduction (form IT BUS). Any remaining business income above these thresholds is then taxed at a flat 3% rate.
Only business income earned by a sole proprietorship or a pass-through entity generally qualifies for the deduction. A pass-through entity includes partnerships, S corporations and LLCs (limited liability companies).
The federal Qualified Business Income Deduction (QBID) has no impact on the Ohio income tax return or form IT BUS. It does not factor into Ohio's income tax calculation.
Nonbusiness income for all taxpayers is taxed separately using progressive tax brackets and rates.
See R.C. 5747.01(A)(28), 5747.01(B), and 5747.01(C) for more information.
Ohio Business Income Resources
- 2022 Ohio Schedule IT BUS - This form is used to calculate the Business Income Deduction and your tax on business income.
- 2022 Ohio Schedule IT BUS Instructions - Instructions for the form are found in the Individual and School District income tax instructions.
- Definitions and Examples - The Individual and School District income tax instructions provide some helpful definitions and examples of business and nonbusiness income.
- Frequently Asked Questions - Get answers to some of the more frequently asked questions concerning business income and the Business Income Deduction.
- Ohio Virtual Tax Academy - Click the "Individual Income Tax" link to view presentations on business income and the Business Income Deduction.
Taxpayers with additional questions on this subject may contact the Department of Taxation by email or by calling 1-800-282-1780 (1-800-750-0750 for persons who use text telephones (TTYs) or adaptive telephone equipment).