by Karen Brenneman, CPA, MT, Managing Partner
Governor Kasich signed Ohio House Bill 64 into law on July 2 providing new tax rate reductions that will benefit both individuals and small businesses in our fine state. The newly enacted law may have a funny name (Amended Substituted House Bill 64) but it contains a number of positive tax changes for Hall, Kistler & Company clients and all Ohioans, including:
- An across the board tax rate cut of 6.3% for individuals, making the top tax bracket less than 5% retroactive to January 2015. This is the lowest Ohio rates have been since 1982. New withholding tables will be coming to employers later in July.
- The small business deduction of 75% on the first $250,000 of business income is continued for 2015 and will increase to 100% for 2016 and beyond. A new flat tax of 3% of business income from pass-through entities will be in effect for 2015 on business income above $250,000.
- There are now two Ohio tax apps you may want to deploy. One checks on your tax refund and the other is a sales tax rate finder based on your current location. The latter may come in handy for business owners on the move that have to charge sales tax.
There are also a few things the budget didn’t include, which I find positive as well. Two of these significant omissions are
- No increase, as proposed, in the Ohio CAT rate
- No base expansion of state sales tax on professional services
Giving us some indication of where our state tax system is headed, the law also called for a tax policy study commission to make recommendations on further reforming Ohio’s tax system. Specific questions include determining how best to:
- Transition Ohio’s personal income tax to a 3.5% – 3.75% flat tax
- Reform the tax code to maximize Ohio competitiveness
- Reform the state’s severance tax by October 1
- Make some of Ohio’s tax credits work more efficiently by converting them to grant programs
The last piece of good news is a sales tax holiday slated to run from August 7 through August 9. It exempts sales tax on Ohio purchases of school clothes up to $75 per item as well as school supplies and other school related items up to $20 each during these days.
With this new set of tax laws, you have a real opportunity to devise strategies that will lower your tax liability and enhance your overall financial position for years to come. Hall, Kistler & Company is happy to help you determine the best approach for your situation, so that you can take full advantage of the changes in House Bill 64.