Don’t Forget to Consider the Ohio Business Income Deduction

Cathy Robinson, CPA

Principal

robinson@hwco.com

 

Beginning in 2015, Ohio has increased the benefit to taxpayers for the Ohio Business Deduction.  A business will receive up to 75% deduction on their first $250,000 of business income. This means up to $187,500 of business income will go untaxed by the state of Ohio no matter where it was earned.  The calculation removes the apportionment calculation that was part of the original deduction.  The remainder of the business greater than $250,000 will be taxed at the graduated rate of up to 3%.  The new deduction applies to both pass - through entities and proprietors alike.  The taxpayer should be careful though and take a closer look at what exactly constitutes business income.  Business income includes monies received in the ordinary course of a trade or business operation.

 

The deduction gets even better in 2016 when individuals can deduct 100% of their business income from their personal Ohio income tax.

 

Please remember to consider this tax deduction when preparing your return, and as always when in doubt, consult your advisor.

 

One Crucial Tip For Business Property Owners

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

Attention business owners: do you own property? Do you know what a cost segregation study is? If you don't, you should.  As a taxpayer, you can increase your cash flow significantly by segregating property costs.

 

Cost segregation studies are a tax planning tool that can help companies or individuals, who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions.

 

When you purchase property, it does not just include a building, but it includes various components of the interior or exterior. These components, such as a parking lot, wiring, carpet, and electrical outlets may all qualify to be depreciated quicker than 39 years by the owner. The purpose of a cost segregation study is to identify all of the potential property related costs that could possibly be depreciated over five, seven or fifteen years.

 

The best time to have a cost segregation study completed is during the year of construction, purchase or remodel.  However, it still can be completed at a later date.  It is important to also consult your accounting professional when considering a cost segregation study as they will work closely with the professional who will be performing the study. 

 

In the end, a cost segregation study is a valuable and effective planning tool available to any owner of real estate property.  It offers the owner the opportunity to defer taxes, reduce overall tax burden and free up capital thus improving cash flow.  As a taxpayer who owns, renovates or constructs real estate,  you stand to benefit from having a cost segregation study performed on your property.