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ON JUNE 16, 2014 Ohio G o v e r n o r J o h n Kasich delivered Oh io ind iv idua l taxpayers a handful of new tax breaks for 2014. The governor believes that this additional tax relief will continue to help spur Ohio's economic recovery by offering business owners ta x sav- ings to reinvest in expansion and job creation within the state. A ll Ohio individual taxpayers will receive the benefit of reduced tax rates and some will also be able to ta ke advantage of cha nges in persona l exemption amounts and certain tax credits. In a tax package introduced in 2013, Ohio individual income tax rates were scheduled to reduce by 10 percent over a three-year period through 2015. The new 2014 law accelerates the previ- ously scheduled three-year plan to be fully realized in 2014, retroactive to January 1. Withholding tables for processing payroll checks were adjusted in July to account for the rate reduc- tions. Although Governor Kasich has publicly stated his desire to reduce the highest individual tax rate to less than 5 percent, the highest individual tax rate for 2014 is 5.392 percent, down from 5.421 percent in 2013 and from 5.925 percent in 2012. Another big change is a one-year expansion of the small business ta x deduction that was a pleasant surprise to many Ohio business owners last year. The tax deduction is increased to 75 percent of the first $250,000 of net business income for the year 2014. This is an increase from the 50 percent deduction that was available for the first time in 2013. O w ners of and investors in Ohio businesses st r uc t u red a s sole propr ietorsh ip pass-through entities (PTEs) qualif y for this additional deduction. PTEs include: partnerships, Subchapter S corporations (S-corps) and Limited Liability Companies (LLCs). Income generated by the business and passed through to the owners/investors is subject to income ta x on their per- sonal tax return. The small business tax deduction is also reported on the business owners/investors personal income tax return, thereby reducing the amount of taxable income from the pass through investment. Individuals able to take advantage of the maximum deduction at the highest individual tax rate in 2014 will enjoy Ohio income tax savings of $10,110. For 2014, the Ohio Earned Income Tax Credit is being doubled from 5 to 10 percent of the federal credit. Those who qualify for the Federal Earned Income Credit will qualify for the additional credit in Ohio. Finally, the new law is also increasing the personal exemption amount for many Ohio taxpayers in 2014. Families earning less than $40,000 will see personal exemptions rise to $2,200 in 2014, compared to $1,700 in 2013. For families earning between $40,000 and $80,000, the personal exemption amount rises to $1,950 in 2014. Ron Pavlovich is a senior manager in the Medical Practice Management Group of CBIZ MHM, LLC in Akron, Ohio. ■ By Ronald F. Pavlovich, CPA Ohio Offers New Tax Breaks for 2014 2 0 1 4 S E P T E M B E R /O C T O B E R ■ M D N E W S . CO M ■ MD NEWS Cleveland/Akron/Canton | 3 5