August 3, 2021

2021 Ohio Budget Bill Changes and Opportunities

By Josh Stein, Manager, Tax & Business Services

2021 Ohio Budget Bill Changes and Opportunities State & Local Tax

On July 1, 2021, Ohio Governor Mike DeWine signed into law Ohio’s biennial budget bill – House Bill 110. There are a number of provisions in the bill that will positively affect businesses and owners.

  • State Income Tax – Beginning in 2021, Ohio’s top income tax bracket is lowered to 3.99% on 2021 income greater than $110,650. The top rate was previously 4.797%
  • Municipal Income Taxes – The temporary municipal income tax withholding provision for employers is extended through December 31, 2021. For 2021, employees will be able to receive a refund of taxes withheld to a municipality where they neither lived nor physically worked. These changes do not affect business net profits taxes.
  • Capital Gain Deductions – Beginning in tax year 2026, certain types of venture capital and other business sale capital gains will be eligible for a state income tax deduction on those gains. There are separate qualifications for both gain types, although significant Ohio operations are generally required.
  • Education Credits – Ohio has introduced personal income tax credits for certain education expenses for home schooled dependents, as well as for cash donations made to certain scholarship-granting organizations for primary and secondary schools that prioritize low-income students.
  • Sales Tax – Effective October 1, 2021, Ohio has repealed sales tax on Employment Services (temporary labor) and Employment Placement Services. Ohio has also reinstated the exemption for sales and use tax on the sale of investment metal bullion and investment coins.
  • Commercial Activity Tax (CAT) – Ohio has permanently excluded Bureau of Workers Compensation dividends paid from CAT gross receipts. Ohio has also excluded gross receipts of a megaproject supplier for sales of tangible personal property to an Ohio megaproject operator.
  • Job Creation Tax Credit (JCTC) – Payroll of employees working from home may now be included in a company’s annual employment reporting for the JCTC, starting with the 2020 report year. This provision is applicable for any JCTC approved prior to September 29, 2017.

For further assistance or questions related to Ohio’s budget bill, please contact your Marcum State and Local Tax professional.