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2014 Ohio
Small Business
Investor Income
Deduction
Instructions for
Apportioning
Business Income
Solely for Purposes
of Computing the
Small Business
Investor Income
Deduction
Rev. 1/15
Department of
hio Taxation
tax. hio.gov
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IT SBD
Rev. 1/15
Ohio schedule IT SBD is solely for use in determining the small business investor
income deduction. See Ohio Revised Code section (R.C.) 5747.01(A)(31).
Do not use this schedule to compute Ohio adjusted gross formula for business income on Ohio Schedule IT SBD). Please
income. The schedule and instructions apply to resident, note that the net business income consists only of those items of
part-year resident and nonresident individuals who have income and deduction that would be included in Ohio adjusted
business income from Ohio sources. If your only source of gross income (Ohio form IT 1040, line 3) if not for this deduction.
Ohio income is wages paid by an unrelated employer, you
are not eligible to use this schedule. R.C. 5747.22(B) and (C) Apportionment and Allocation
of Income and Deductions of Pass-Through Entities
If your software program allows for a PDF attachment, the IT
SBD schedule should be attached to the electronic submission Apportionment of Pass-Through Entity Business
as a PDF attachment. If your software does not allow for PDF Income
attachments, please keep the IT SBD schedule(s) with your An individual taxpayer’s distributive or proportionate share
record as it may be requested upon review of the return. If you of the business income and deductions of a pass-through
are submitting a paper return, submit the IT SBD with the return.entity shall be apportioned to Ohio in the hands of the
pass-through entity according to the instructions for ap-
Important: This schedule assumes that the taxpayer has portioning business income. Such business income and
business income from only one entity/business group. Tax- deductions thus apportioned to Ohio are then allocated to
payers who have income/gain from more than one entity/ the investors in proportion to their right to share in such
business group should complete a separate IT SBD schedule business income. In the case of this schedule in calculat-
for each entity/business group. ing the small business investor income deduction, the
individual’s net business income is therefore apportioned
Pass-through entities and trusts should not use this schedule.
using the ratio calculated in Part II as if it were in the hands
Definitions of the pass-through entity.
Business Income and Nonbusiness Income Business Income
“Business income” means income, including gain or loss, (Part I, A)
arising from transactions, activities and sources in the regu-
Line 1b – Compensation Received from a Pass-Through
lar course of a trade or business and includes income from
Entity
real, tangible and intangible property if the acquisition, rental,
Guaranteed payment or compensation paid by a pass-through
management and disposition of the property constitute integral
entity (S corporation, partnership, limited liability company treat-
parts of the regular course of a trade or business operation.
ed as a partnership for income tax purposes, etc.) having nexus
Also, “business income” consists of income, including gain
with Ohio to an investor holding at least a 20% direct or indirect
or loss, from a partial or complete liquidation of a business,
interest in the entity is considered a distributive share of income
including, but not limited to, gain or loss from the sale or other
and treated as business income subject to apportionment for
disposition of goodwill (R.C. 5747.01(B)).
purposes of computing the individual’s small business investor
In general, income, deductions, gains and losses recognized income deduction (R.C. 5733.40(A)(7)). Therefore, include on
by a sole proprietorship or a pass-through entity are items this line the amount of the guaranteed payment or compensa-
of business income that the individual must apportion using tion amount you received if you are an investor holding at least
Part I, C of Ohio Schedule IT SBD. a 20% direct or indirect interest in the entity. The “reciprocity
agreements” between Ohio and neighboring states do not
“Nonbusiness income” means all income other than business
apply to full-year nonresidents directly or indirectly owning at
income and may include, but is not limited to, compensation,
least 20% of the stock or other equity of a pass-through entity.
rents and royalties from real or tangible personal property,
capital gains, interest, dividends, distributions, patent or Line 2 – Related Member Add-back
copyright royalties, and lottery winnings, prizes and awards R.C. 5733.40(A)(3) and (4) disallow expenses and losses
(R.C. 5747.01(C)). Nonbusiness income should be excluded incurred in connection with all direct and indirect transactions
from the fi gures reported on this schedule. between each pass-through entity and its related members.
“Related member” is defi ned in R.C. 5733.042(A)(6) and
See Kemppel v. Zaino, 91 Ohio St.3d 420 (2001).
5733.40(P). As such, you must add back on Part I, line 2
your distributive/proportionate share of such expenses and
R.C. 5747.21 and 5747.22
losses. You must also enter this amount on Ohio form IT 1040
Apportionment of Business Income or Deductions
Schedule A line 34 as a section 5733.40(A) pass-through
(See Instructions for line 11 and Part II on Schedule)
entity adjustment. However, do not add back on this line or
The amount of business income and deductions apportioned to include on Ohio form IT 1040 Schedule A line 34 the following:
Ohio is determined by multiplying the net business income by (i) amounts shown on line 1 of this schedule or (ii) expenses
an Ohio apportionment ratio, which is the sum of the property, or losses incurred in connection with sales of inventory to the
payroll and sales factors (please refer to the Part II apportionment extent that the cost of the inventory and the loss incurred were
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IT SBD
Rev. 1/15
calculated in accordance with Internal Revenue Code sections (i) the pass-through equity is an equity investor in another
(I.R.C.) 263A and 482. pass-through entity that has generated I.R.C. 168(k) bonus
depreciation and/or I.R.C. 179 depreciation; AND
Line 3 – Ordinary Income or Loss
Include ordinary income or loss from business activities to the (ii) because of either the federal passive activity loss limita-
extent not shown on line 1a and/or line 1b. Include only in- tion rules or the federal at-risk limitation rules, this investor
come that is business income as defi ned by R.C. 5747.01(B). pass-through entity is unable to deduct fully a loss passing
through from the other pass-through entity to this investor
Line 5 – Net Capital Gain or Loss pass-through entity.
Include on this line gains or losses, including capital gains
or losses that are “business income.” See the “Definitions” In such circumstances, to the extent that this investor pass-
section on page 2. Gains or losses reported on this line must through entity does not deduct the loss passing through, this
be those which are generated from transactions, activities investor pass-through entity can defer making the “2/3 or 5/6
and sources in the regular course of a trade or business or add- back” until the taxable year or years for which this inves-
from assets integral to the taxpayer’s business operation. tor pass-through entity does deduct the investee pass-through
entity’s loss and receives a federal tax benefi t from the bonus
Example: A farmer sells a tractor used in his wheat farming depreciation amount and/or the I.R.C. 179 amount generated
operation that generates a capital gain. The wheat cannot by the investee pass-through entity. Of course, this investor
be harvested without use of the tractor. Since the tractor was pass-through entity cannot begin claiming the related two- or
integral to the taxpayer’s business operations, the capital five-subsequent years deduction until the first taxable year
gain can be reported on this line. immediately following the taxable year for which this investor
Line 6 – Depreciation Adjustments pass-through entity makes the 2/3 or 5/6 add-back.
If your business is a sole proprietorship, for tax years 2012 For detailed information and examples regarding this adjust-
and thereafter, add 5/6 of I.R.C. 168(k) bonus depreciation you ment, see R.C. 5747.01(A)(20) as amended by the 129th
claimed. Also add 5/6 of the excess of the I.R.C. 179 depreciation General assembly in HB 365 and the department’s informa-
expense you claimed over the amount of the I.R.C. 179 deprecia-tion release entitled “Recently Enacted Ohio Legislation
tion expense that would have been allowed based upon I.R.C. Affects Depreciation Deductions for Taxable Years Ending
179 in effect on Dec. 31, 2002. If your business is a pass-through 2001 and Thereafter” by visiting tax.ohio.gov. The depart-
entity, add your distributive or proportionate shares of these re- ment posted this release on July 31, 2002, and revised the
spective fractional I.R.C 168(k) and 179 depreciation amounts. release in July 2005 and June 2009.
Replace “5/6” with “2/3” for employers who increased their Ohio
income taxes withheld by an amount equal to or greater than Line 7 – Miscellaneous Federal Income Tax Adjustments
10 percent over the previous year. Replace “5/6” with “6/6” for Because of a recent amendment to R.C. section 5701.11, there
taxpayers who incur a net operating loss for federal income tax are no miscellaneous federal tax adjustments on this schedule.
purposes if the loss was a result of the 168(k) and/or 179 depre- See Sub. House Bill 58, 129th General Assembly. However,
ciation expenses. No add-back is required for employers who you must make all other required adjustments for this line.
increased their Ohio income taxes withheld over the previous year
by an amount greater than or equal to the sum of the 168(k) or Deductions From Business Income (Part I, B)
179 depreciation expenses. No add-back is required for 168(k)
Line 9a – Certain Business Deductions
and/or 179 depreciation amounts related to a pass-through entity
Include on this line amounts paid and reported as business
in which the taxpayer has less than 5% ownership. See R.C.
deductions in arriving at adjusted gross income on your fed-
5747.01(A) (20) as amended by the 129th General Assembly in
eral 1040 return for the following: Keogh, SIMPLE IRA, SEP,
HB 365 and information releases 2002-02 and 2002-01 regarding
self-employment tax and self-employment health insurance.
Ohio bonus depreciation adjustments available on our Web site
at tax.ohio.gov. These releases were originally posted on July Line 9b – Depreciation Adjustments
31, 2002 and Nov. 7, 2002. Deduct 1/5, 1/2 or 1/6 of the Internal Revenue Code sections
168(k) and 179 depreciation adjustments that you added back
Under I.R.C. 179, as that section existed on Dec. 31, 2002,
on your previous Ohio income tax returns. The fraction used
the maximum amount that could be expensed was $25,000,
depends on the fraction used when the add-back took place.
and the phase-out began once the cost of purchases of
Deduct 1/5 of amounts that resulted from a 5/6 add-back. De-
I.R.C. 179 property during the year exceeded $200,000. So,
duct 1/2 of amounts that resulted from a 2/3 add-back. Deduct
under the prior law the sole proprietorship or pass-through
1/6 of amounts that resulted from a 6/6 add-back. You can take
entity could not claim any I.R.C. 179 expense if the entity’s
this deduction even if you no longer directly or indirectly own
purchases during the year of I.R.C. 179 property, as defined
the asset. See R.C. 5747.01(A)(21) as amended by the 129th
on Dec. 31, 2002, were $225,000 or more.
General Assembly in HB 365 and information releases 2002-02
In addition, a pass-through entity can defer making all or and 2002-01 regarding Ohio bonus depreciation adjustments
some of the add-back under the following circumstances: available on our Web site at tax.ohio.gov. These releases were
originally posted on July 31, 2002 and Nov. 7, 2002.
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Line 9d – Business Income Deductible/Miscellaneous at the end of the taxable year and dividing the total by two.
Federal Income Tax Adjustments The tax commissioner may require the use of monthly values
You are required to deduct business income deductibles such during the taxable year if such values more reasonably reflect
as domestic production activities deduction, etc. Additionally, the average value of the sole proprietor’s or pass-through
because of a recent amendment to R.C. section 5701.11, there entity’s property.
are no miscellaneous federal tax adjustments on this schedule.
See Sub. House Bill 58, 129th General Assembly. However, Exclusions
you must make all other required adjustments for this line. Exclude from column 1 (within Ohio) and column 2 (total
everywhere) the following:
Net Business Income, Apportionment (Part I, C)
• Construction in progress;
Each factor is weighted: The property and payroll factors are • Property relating to, or used in connection with, the pro-
weighted at 20% each and the sales factor at 60%, for a total duction of nonbusiness income. See R.C. 5733.05(B)(2)
of 100%. If any factor has a denominator (total everywhere as amended by Amended Substitute House Bill 95, 125th
figure) of zero, the weight given to the other factors must be General Assembly;
proportionately increased so that the total weight given to
the combined factors is 100%. For example: If the business • The numerator and the denominator of the property factor
entity has no payroll everywhere, then the property and sales includes real property and tangible personal property that
factors are weighted at 25% and 75%, respectively, to total the sole proprietor or pass-through entity rents, subrents,
100%. Alternatively, if the business has neither payroll nor leases or subleases to others if the income or loss from
property everywhere, the sales factor is weighted at 100%. such rentals, subrentals, leases or subleases is busi-
ness income. See R.C. 5733.05(B)(2)(a) as amended
Line 11 – Ohio Apportionment Ratio (Part II, Line 4) by Amended Substitute House Bill 95, 125th General
Note: When calculating the fraction used to compute the Ohio Assembly. Property owned by the sole proprietor or pass-
small business investor income deduction, a taxpayer who through entity and leased to others is excluded from the
has invested in a partnership, an S corporation or a limited property factor only if the property generates nonbusiness
liability company treated as a partnership for federal income income;
tax purposes must apply the “aggregate” (conduit) theory of
taxation. That is, the character of all income and deductions • The original cost of property within Ohio with respect to
(and adjustments to income and deductions) realized by a the air pollution, noise pollution or industrial water pollu-
pass-through entity in which the taxpayer has invested retains tion control certifi cates issued by the state of Ohio (R.C.
that character when recognized by the taxpayer. Furthermore, 5733.05(B)(2)(a)); AND
the taxpayer’s factors must include the proportionate share
• The original cost of real property and tangible property (or
of each lower-tiered pass-through entity’s property, payroll
in the case of property that the sole proprietor or pass-
and sales (R.C. 5733.057 and 5747.231).
through entity is renting from others, eight times its net
Property Factor annual rental rate) within Ohio that is used exclusively
The property factor is a fraction the numerator of which is the during the taxable year for qualifi ed research.
average value of the sole proprietor’s or pass-through entity’s Do not include in column 1 but do include in column 2 the
includable real and tangible personal property owned or rented, original cost of qualifying improvements to land or tangible
and used in the trade or business in this state during the taxable personal property in an enterprise zone for which the taxpayer
year, and the denominator of which is the average value of all holds a Tax Incentive Qualifi cation Certifi cate issued by the
the sole proprietor’s or pass-through entity’s includable real Ohio Development Services Agency.
and tangible personal property owned or rented, and used in
the trade or business everywhere during such year. Line 1(a), Column 1 – Property Owned Within Ohio
Enter the average value of the sole proprietor’s or pass-
Ohio law includes in the property factor real property and through entity’s real property and tangible personal property,
tangible personal property that the sole proprietor or pass- including leasehold improvements, owned and used in the
through entity rents, subrents, leases or subleases to others trade or business in Ohio during the taxable year.
if the income or loss from such rentals, subrentals, leases or
subleases is business income. Ohio law specifi cally excludes Line 1(a), Column 2 – Property Owned – Total Everywhere
from the factor all property relating to, or used in connection Enter the average value of all the sole proprietor’s or pass-
with, the production of nonbusiness income allocated under through entity’s real property and tangible personal property,
R.C. 5733.051. Generally, all sole proprietorship and pass- including leasehold improvements, owned and used in the
through entity income and gain is business income. trade or business everywhere during the taxable year.
Property owned by the sole proprietor or pass-through entity Line 1(b) – Property Rented
is valued at its original cost average value. Average value is Enter the value of the sole proprietor’s or pass-through
determined by adding the cost values at the beginning and entity’s real property and tangible personal property rented
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Rev. 1/15
and used in the trade or business in Ohio (column 1) and • The recipient’s service is performed both within and outside
everywhere (column 2) during the taxable year. Property Ohio, but the service performed outside Ohio is incidental
rented by the sole proprietor or pass-through entity is valued to the recipient’s service within Ohio; OR
at eight times the annual rental rate (annual rental expense
less subrental receipts). • Some of the recipient’s service is performed within Ohio
and either the recipient’s base of operations, or if there is
Line 1(c) – Property Total Within Ohio and Everywhere no base of operations, the place from which the recipient’s
Add lines 1(a) and 1(b) for column 1 (within Ohio) and column service is directed or controlled is within Ohio, or the base
2 (total everywhere). of operations or the place from which the service is directed
or controlled is not in any state in which some part of the
Line 1(c), Column 3 – Property Ratio service is performed, but the recipient’s residence is in
Enter the ratio of property within Ohio to total everywhere by Ohio.
dividing column 1 by column 2.
Compensation is paid in Ohio to any employee of a common or
Line 1(c), Column 5 – Weighted Property Ratio contract motor carrier corporation who performs his regularly
Multiply the property ratio on line 1(c), column 3 by the prop- assigned duties on a motor vehicle in more than one state
erty factor weighting of 20%. in the same ratio by which the mileage traveled by such em-
Payroll Factor ployee within Ohio bears to the total mileage traveled by such
The payroll factor is a fraction, the numerator of which is employee everywhere during the taxable year. The statutorily
the total compensation paid in this state during the taxable required mileage ratio applies only to contract or common
year by the sole proprietor or pass-through entity, and the carriers. Thus, without approval by the tax commissioner a
denominator of which is the total compensation paid both manufacturer or merchant who operates its own fl eet of de-
within and without this state during the taxable year by the livery trucks cannot use the ratio of miles traveled in Ohio to
sole proprietor or pass-through entity. As used below, the miles traveled everywhere to situs driver payroll. See Cooper
term “compensation” means any form of remuneration paid Tire and Rubber Co. v. Limbach (1994), 70 Ohio St. 3d 347.
to an employee for personal services. Line 2, Column 2 – Payroll Total Everywhere
Exclusions Enter the total amount of the sole proprietor’s or pass-through
Exclude from column 1 (within Ohio) and column 2 (total entity’s compensation paid everywhere during the taxable year.
everywhere) the following: Line 2, Column 3 – Payroll Ratio
• Guaranteed payments made to partners; Enter the ratio of payroll within Ohio to total everywhere by
dividing column 1 by column 2.
• Compensation that the S corporation paid to any share-
holder if the shareholder directly or indirectly owned at Line 2, Column 5 – Weighted Payroll Ratio
least 20% of the S corporation at any time during the year Multiply the property ratio on line 2, column 3 by the payroll
(R.C. 5733.40(A)(7)); factor weighting of 20%.
• Compensation paid in Ohio to employees who are primarily Sales Factor
engaged in qualifi ed research; AND The sales factor is a fraction whose numerator is the sole
proprietor’s or pass-through entity’s includable business in-
• Compensation paid to employees to the extent that the com- come receipts in Ohio during the taxable year and whose de-
pensation relates to the production of nonbusiness income nominator is the sum of the sole proprietor’s or pass-through
allocable under R.C 5733.051 (R.C. 5733.05(B)(2)). entity’s within Ohio and without Ohio includable business
income receipts during the taxable year. The sales factor
Do not include in column 1 but do include in column 2 com-
specifi cally excludes receipts attributable to nonbusiness
pensation paid in Ohio to certain specified new employees
income allocable under R.C. 5733.051 (see R.C. 5733.05(B)
at an urban job and enterprise zone facility for which the
(2) and the tax commissioner’s April 2004 information release
pass-through entity has received a Tax Incentive Qualifica-
entitled “Sales Factor Situsing Revisions”).
tion Certifi cate issued by the Ohio Development Services
Agency. Exclusions
The following receipts are not includable in either the numera-
Line 2, Column 1 – Payroll Within Ohio
tor or the denominator of the sales factor even if the receipts
Enter the total amount of the sole proprietor’s or pass-
arise from transactions, activities and sources in the regular
through entity’s compensation paid in Ohio during the
course of a trade or business (see R.C. 5733.05(B)(2)(c)
taxable year. Compensation is paid in Ohio if any of the
as amended by Substitute House Bill 127, 125th General
following apply:
Assembly):
• The recipient’s service is performed entirely within Ohio;
• Interest or similar amounts received for the use of, or for
OR
the forbearance of the use of, money;
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• Dividends; destination after all transportation (including customer
transportation) has been completed. See Dupps Co. v.
• Receipts and any related gains or losses from the sale or Lindley (1980), 62 Ohio St. 2d 305.
other disposal of intangible property other than trademarks,
trade names, patents, copyrights and similar intellectual Revenue from servicing, processing or modifying tangible
property; personal property is sitused to the destination state as a
sale of tangible personal property. See Custom Deco, Inc. v.
• Receipts and any related gains and losses from the sale Limbach, BTA Case No. 86-C-1024, June 2, 1989.
or other disposal of tangible personal property or real
property where that property is a capital asset or an asset • Receipts from sales of real property inventory in Ohio.
described in I.R.C. 1231. For purposes of this provision
the determination of whether or not an asset is a capital • Rents and royalties from tangible personal property to the
asset or a 1231 asset is made without regard to the holding extent the property was used in Ohio.
period specifi ed in the I.R.C.; AND • Rents and royalties from real property located in Ohio.
• Receipts from sales to (a) an at-least-80%-owned public • Receipts from the sale, exchange, disposition or other grant
utility other than an electric company, combined electric of the right to use trademarks, trade names, patents, copy-
company, or telephone company, (b) an at-least-80%- rights and similar intellectual property are sitused to Ohio
owned insurance company, or (c) an at-least-25%-owned to the extent that the receipts are based on the amount of
fi nancial institution. use of that property in Ohio. If the receipts are not based
Note: Income and gain from receipts excluded from the sales on the amount of use of that property, but rather on the right
factor is not presumed to be nonbusiness income. All income, to use the property and the payor has the right to use the
gain, loss and expense is presumed to be apportionable property in Ohio, then the receipts from the sale, exchange,
business income – even if the related receipts are excluded disposition or other grant of the right to use such property
from the sales factor. are sitused to Ohio to the extent the receipts are based on
the right to use the property in Ohio.
The law specifi cally includes in the sales factor the following
amounts when arising from transactions, activities and sources • Receipts from the performance of services and receipts from
in the regular course of a trade or business: (i) receipts from any other sales not excluded from the sales factor and not oth-
sales of tangible personal property, (ii) receipts from the sale erwise sitused within or without Ohio under the above situsing
of real property inventory (such as lots developed and sold by provisions are situsable to Ohio in proportion to the purchaser’s
a real estate developer), (iii) rents and royalties from tangible benefi t, with respect to the sale, in Ohio to the purchaser’s
personal property, (iv) rents and royalties from real property, (v) benefi t, with respect to the sale, everywhere. The physical
receipts from the sale, exchange, disposition or other grant of location where the purchaser ultimately uses or receives the
the right to use trademarks, trade names, patents, copyrights benefi t of what was purchased is paramount in determining
and similar intellectual property, (vi) receipt from the sale of the proportion of the benefi t in Ohio to the benefi t everywhere.
services and other receipts not expressly excluded from the Note: For taxable years ending on or after Dec. 11, 2003, the
factor. These amounts are situsable to Ohio as set forth below. “cost of performance” provision is no longer the law.
Line 3, Column 1 – Sales Within Ohio Line 3, Column 2 – Sales – Total Everywhere
Enter the total of gross receipts from sales not excludable Enter the total of such includable gross receipts, less returns
from the numerator and the denominator of the sales factor, and allowances, from sales everywhere.
to the extent the includable gross receipts refl ect business Line 3, Column 3 – Sales Ratio
done in Ohio. Sales within Ohio include the following: Enter the ratio of sales within Ohio to total everywhere by
• Receipts from sales of tangible personal property, less dividing column 1 by column 2.
returns and allowances, received by the purchaser in Ohio. Line 3, Column 5 – Weighted Sales Ratio
In the case of delivery of tangible personal property by Multiply the sales ratio on line 3, column 3 by the sales factor
common carrier or by other means of transportation, the weighting of 60%.
place at which such property is ultimately received after
all transportation has been completed is considered as the Line 4, Column 5 – Total Weighted Apportionment Ratio
place at which such property is received by the purchaser. Add column (5), lines 1 (c), 2 and 3.
Direct delivery in Ohio, other than for purposes of trans-
portation, to a person or fi rm designated by a purchaser Ohio Small Business Investor Income Deduction
constitutes delivery to the purchaser in Ohio, and direct (Part I, D)
delivery outside Ohio to a person or fi rm designated by a
Line 13 – Ohio Small Business Investor Income
purchaser does not constitute delivery to the purchaser in
Individuals shall complete one schedule IT SBD (lines 1-12)
Ohio, regardless of where title passes or other conditions
for each pass-through entity in which the taxpayer has an
of sale. Customer pick-up sales are situsable to the final
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Rev. 1/15
ownership interest or sole proprietorship. Enter the sum of this state under R.C. 5747.21 and 5747.22, to the extent not
line 12 from each separate schedule. otherwise deducted or excluded in computing federal or Ohio
adjusted gross income for the taxable year.”
Line 14 – Maximum Ohio Small Business Investor Income
If fi ling status is married filing jointly or single, head of house-Note: Generally, all sole proprietorship and pass-through
hold, enter $250,000 on this line. If fi ling status is married entity income and gain is business income.
filing separately, enter $125,000 on this line. In either case,
the amount on this line also can not exceed the amount of Line 15 – Ohio Small Business Investor Income Deduction
your Ohio adjusted gross income as if it were calculated prior Enter on this line the lesser of 75% of line 13 or 75% of line
to taking the Ohio small business investor income deduction. 14. R.C. 5747.01(A)(31) states, “deduct three-quarters of the
taxpayers Ohio small business investor income, the deduc-
For purposes of this division, “Ohio small business investor tion not to exceed $93,750 for each spouse if spouses file
income” means the portion of the taxpayer’s Ohio adjusted separate returns under R.C. 5747.08 or $187,500 for all other
gross income that is business income reduced by deduc- taxpayers. No pass-through entity may claim a deduction
tions from business income and apportioned or allocated to under this division.”
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Summary of Ohio Tax Treatment of Income and Deductions for
Purposes of the Small Business Investor Income Deduction
Note: Except for lottery prizes and awards, all income and gain is presumed to be business income/gain.
Type of Income and Deductions Ohio Tax
1. Guaranteed payments and compensation If the individual directly or indirectly owns at least 20% of the business,
paid to an individual for services performed the individual must show the guaranteed payments and compensation
on Part I, A, line 1b.
2. Gains or losses from the sale or transfer of Apportion if gain constitutes business income.
real property
3. Gains or losses from the sale or transfer of Apportion if gain constitutes business income.
tangible personal property
4. Gains or losses from the sale or transfer of Apportion if gain or loss constitutes business income.
intangible personal property
5. Rents or royalties from real property Apportion if gain constitutes business income.
6. Rents or royalties from tangible personal Apportion if the rents or royalties constitute business income.
property
7. Patent and copyright royalties Apportion if the rents or royalties constitute business income.
8. Depreciation expense add-back/deduction If the depreciation relates to nonbusiness property, the 1/2, 5/6 or 6/6
add-back and corresponding 1/2, 1/5 or 1/6 deductions are not con-
sidered business income and deductions. However, if the depreciation
relates to business property, these depreciation adjustments are ap-
portioned as items of business income and deduction using Part I of the
small business deduction schedule.
Federal Privacy Act Notice
Because we require you to provide us with a Social Security number, the Federal Privacy Act of
1974 requires us to inform you that providing us with your Social Security number is mandatory.
Ohio Revised Code sections 5703.05, 5703.057 and 5747.08 authorize us to request this informa-
tion. We need your Social Security number in order to administer this tax.
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