Ohio Gov. Kasich proposes tax changes

There has been a lot of media attention over the proposed changes that are part of Governor Kasich’s budget proposal (HB 59). Though the budget bill is still not final and we have every reason to believe it is far from being passed, it must be approved and in place by July 1, 2013, when the start of the state’s new biennium begins.

The aspect of the budget bill that has gotten the most press is the expansion of the sales tax base to include the taxation of services. Currently, the only services that would be exempt would be services that are considered to be a personal necessity, such as medical and dental.

Reflected below is just a small sampling of services that would become taxable under the governor’s proposal on Sept. 1, 2013. A complete listing of the potential services impacted by the bill can be found here.

  • Legal services
  • Cutting, coloring, styling of hair
  • Magazine subscriptions
  • Real Estate management services
  • Service charges of banking institutions

The budget proposal also contains a reduction in the state sales tax rate from 5.5 to 5 percent. The additional county/transit taxes will be capped at 1.5 percent, so the maximum rate in Ohio would be 6.5 percent.

The governor is also proposing a 20 percent reduction in individual income tax rates over the next three years. If the reduction is enacted, the top Ohio individual income tax rate will be reduced from 5.925 percent to 4.47 percent.

The other key provision of the budget proposal would impact owners of pass-through entities. Under the proposal if passed, these owners would be permitted to take a deduction of 50 percent of their annual pass-through income. The maximum deduction would be $375,000 for individuals filing a joint return, $187,500 if married filing separately.

SS&G wants to caution you that these changes are all just proposed law changes and that the budget bill has a long way to go before it is passed. Our tax professionals will continue to monitor the budget bill along the way and provide updates.




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