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Income tax tip: Small business investor deduction
by Leah Curtis
Thanks to a Farm Bureau member, Ohio Farm Bureau was reminded of the need to offer further education about a new Ohio income tax deduction that may apply to your taxes this year.
Many farmers may not be aware of this new deduction, included in the state of Ohio’s biennial budget bill, which went into effect in 2013. The deduction allows for individual taxpayers owning businesses organized as sole proprietorships or pass-through entities (such as a partnership or L.L.C.) to take a deduction of up to 50 percent of their Ohio sourced business income, up to $250,000 for those married filing jointly.
The Ohio Department of Tax has specifically included income from farming as an example of “business income” for purposes of this new deduction. The deduction cannot exceed the taxpayer’s Ohio adjusted gross income if calculated prior to taking the deduction, but could result in significantly lowering any taxes due to the state. This deduction is only available to individuals filing with the Ohio tax form IT-1040.
Every tax situation is different, so farmers interested in determining whether this deduction may apply to them should contact their accountant or tax preparer with questions. The Ohio Department of Taxation also has a set of frequently asked questions.
Even if farmers have already filed for this year, they could consider filing an amended return to take advantage of this deduction. Further information can be found here.
Leah Curtis is the director of agricultural law for Ohio Farm Bureau Federation.