The Lima News
Ohio Small business owners will soon find extra cash in their pockets, thanks to a tax cut initiated by Gov. John Kasich and his Republican allies in the legislature.
The answer to how significant the savings is will come soon, now that we're in the heart of tax season.
The savings have been touted to be anywhere between $125,000 to just a few hundred dollars — which should serve as an age-old reminder for businesses not to spend the cash until it's actually clenched in their hand.
Ohio Tax Commissioner Joe Testa likes to talk about the big numbers.
“It's pretty significant,” Testa said. “This gives them the opportunity to have more revenue they can put back into their businesses, to grow their businesses by purchasing additional equipment or marketing their products or maybe even adding a full-time person when they only had a part-time person.”
However, an analysis of the tax savings by the Cincinnati Enquirer says most small business owners shouldn't expect the game-changing proposition described by Testa.
The tax cut allows businesses who file their business income on their individual income tax forms to be able to deduct half of their business income up to $250,000
That means if a business owner earns $250,000 in adjusted gross income, he or she can exclude the first $125,000 from their tax return. The exclusion is available to each investor or owner in a business, said Testa.
Small business owners earning income at the top marginal tax rate – 5.33 percent – could expect to see a $6,000 benefit, added Ohio Development Services Director David Goodman.
However, the Enquirer analysis found that only 5 percent of small businesses will rake in such a bounty. Most will save just a few hundred dollars a year, its figures show.
The Enquirer noted that 80 percent of small businesses earn $25,000 a year or less, which will resulting no more than $351 in tax savings. Those with incomes of $100,000 will save about $2,100, according to the Enquirer.
Together, that income range covers about 95 percent of all small businesses in Ohio, and most of those are at the bottom.
Still, Kasich and his GOP allies in the state legislature argue the tax cut they included in this year's budget makes the state more attractive to small businesses. The only sure thing is whether it's $250 or $125,000 in savings, no small business is going to turn it down.