The state budget signed into law last week by Gov. John Kasich will grant state tax relief for most Ohioans, but also will trigger a one-year tax increase for many small businesses and self-employed individuals.
Businesses or self-employed people making up to about $270,000 a year will pay more because of the way the budget phases in changes in business taxes over two years, according to an analysis by Northeast Ohio Media Group.
The Ohio Department of Taxation confirmed Monday that at least some businesses will pay higher taxes this year. But a spokesman for Senate Republican leaders disputed that conclusion and said that was not the intent of the bill.
John Fortney, spokesman for the Ohio Senate Majority Caucus, said caucus members believed all small businesses would pay lower taxes beginning this year.
But tax department spokesman Gary Gudmundson said that would not be the case.
A new 3 percent rate will apply to the income of all small businesses beginning this year.
Previously, small businesses used a tax-rate scale, starting at close to 0.5 percent for income below $5,200 after deductions and gradually increasing to a top rate of 5.3 percent.
This year, under the 3 percent rate, businesses will again be able to deduct 75 percent of the first $250,000 of business income before calculating taxes.
So, a self-employed person making $60,000 a year would have paid $113 in state income taxes this past April, but will pay about $384 next year. Then, in future years, the tax bill will drop to zero when the deduction increases from 75 percent to 100 percent for business income up to $250,000.
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