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S.B. 18 will Conform Ohio with Federal Tax Law Changes

Ohio Tax Commissioner Jeff McClain recently announced Ohio is following the federal government and Internal Revenue Service in extending the deadline to file and pay Ohio individual income and school district income taxes for tax year 2020.

The new deadline is May 17, an extension of approximately one month from the original deadline of April 15.

Commissioner McClain said the extension is intended to provide some relief to individuals impacted by the public safety measures adopted to contain the spread of the coronavirus.

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As with the IRS extension, Ohio will be waiving penalty on tax due payments made during the extension. Also, as part of legislation passed addressing the continuing emergency, there will be no interest charges on payments made during the extension.

The filing extension, and waiver of penalty and interest, will be available to those filing Ohio individual income tax, and the school district income tax for tax year 2020.

Besides the new deadline to file and pay certain taxes, a piece of legislation will offer taxpayers more help.

Senate Bill 18, which awaits Gov. DeWine’s signature, will conform Ohio with recent changes to federal tax law, including deductibility of expenses from the Paycheck Protection Program and excluding $10,200 in unemployment compensation from income tax. 

Once the bill is signed, Ohio’s tax system will conform to related tax changes to the Consolidated Appropriations Act of 2011, the Consolidated Appropriations of 2021 and the American Rescue Plan Act of 2021.

The following is a list of some of the most significant of the federal law changes affecting Ohio law, including, in parenthesis , the federal law or laws that enacted each change:

Changes affecting individuals

  • A temporary look-back rule for determination of earned income for purposes for the earned income tax credit (EITC). (Ohio allows a piggy-back credit based on a taxpayer’s federal EITC.)
  • A temporary expansion in the amount of and eligibility for the EITC.
  • A temporary increase in the amount of the child and dependent care credit. (Ohio allows a piggy-back credit for certain taxpayers that receive the federal child and dependent care credit.)
  • The extension of an exclusion from gross income for the discharge of indebtedness of a qualified principal residence.
  • A temporary exclusion from gross income for the discharge of student loan indebtedness.
  • A temporary exclusion from gross income for the first $10,200 received in unemployment benefits for taxpayers with $150,000 or less in FAGI or $300,000 for joint filers.
  • An extension of the temporary allowance of a deduction for charitable contributions by nonitemizers.
  • A clarification that the educator expense tax deduction includes expenses for personal protective equipment and other supplies related to the prevention of the spread of COVID-19.
  • An exclusion from gross income for emergency financial aid grants.
  • The transition from a deduction for qualified tuition and related expenses to an increased phase-out threshold of the Lifetime Learning Credit.
  • Temporary special rules for health and dependent care flexible spending arrangements.

Changes affecting businesses

  •  The allowance of a 30-year depreciation period for certain residential rental property.
  • The temporary allowance of a full deduction for business meals (generally, business meals are only 50 percent deductible).
  • A clarification of the tax treatment of Paycheck Protection Program loan forgiveness, including a clarification that expenses paid with covered loans can be deductible.
  • An extension of the payment deadline for certain deferred payroll taxes (including certain self-employment taxes).
  • The extension of the work opportunity tax credit. (Ohio allows a deduction for employee wages that could not be deducted from the business owners’ FAGI due to the work opportunity credit.)
  • The extension of an exclusion for certain employer payments of student loans.
  • An extension of the limitation on excess business losses for noncorporate taxpayers.
  • An exclusion from gross income for Restaurant Revitalization Fund (RRF) grants and Targeted Economic Injury Disaster Loan (EIDL) advances.

If you have questions on how S.B. 18 may impact you or your business, need help filing your income tax or want to file for an income tax extension, please call Zinner & Co. and speak with a member of our Tax Team.