IMPORTANT OHIO INCOME TAX CHANGES SIGNED INTO LAW
Ohio Governor Mike DeWine recently signed two bills – House Bills 62 and 166, that enact several significant Ohio income tax changes for the upcoming tax filing season. The following income tax changes are effective for tax year 2019 (as reported on the return due April 15, 2020):
- The bottom three income tax brackets are combined into one bracket, taxed at a rate of 0%. This means taxpayers with Ohio Taxable Nonbusiness income of $21,750 or less will pay $0 in Ohio income tax.
- All Ohio income tax rates have been reduced by 4%. The top tax rate is now 4.797%.
- Ohio’s personal and dependent exemption amounts will not be adjusted for tax year 2019 and will remain the same as they were for tax year 2018.
- Ohio’s earned income credit (EIC) is simplified. The nonrefundable credit now equals 30% of your federal earned income credit, if applicable.
- There is a newly enacted nonrefundable credit for investing in Ohio Opportunity zones. The Ohio Opportunity Zone credit is administered by the Development Services Agency (DSA) and requires an approved application and credit certificate in order to claim it. This credit will be added to the “Nonrefundable Business Credits” section of the Ohio Schedule of Credits.
Ohio’s Business Income Deduction (BID)
- Ohio now uses the concept of “modified adjusted gross income” (MAGI). Ohio MAGI is simply your Ohio adjusted gross income (Ohio IT 1040, line 3) plus the business income deduction claimed on your Ohio return (found on Ohio Schedule A, line 11).
- If you do not claim the business income deduction, this change will have no impact on your Ohio income tax.
- Ohio modified adjusted gross income is not the same as federal modified adjusted gross income.