Do I qualify for the Ohio IT SBD - Small Business Investor Income Deduction?

I'm a freelance web developer.  I have 0 employees.  All of my services are done in Ohio by myself but provided to clients in other states.  The instruction were incredibly hard to understand.  I have no idea if I qualify or not.   

On a side note, I'm really irritated by TurboTax this year - why should I have to fill out this form separately and then attach it?  Isn't that what I just paid you to do?  The whole point of purchasing tax preparation software is so that these headaches are taken care of for us!  TurboTax should be supporting all tax forms, but especially a form as important as this one.  Otherwise, they should be providing a refund to everyone suckered into buying the Ohio TurboTax software.

  • If I follow the exact instructions, I only get 60% of income counted because I have no payroll and no property (self-employed business w/no employees)
  • You pay yourself.  Are you sure that doesn't count?  Also, are you sure you get the 60%?  There are a number of exceptions in the instructions.
  • My husband is a freelance artist, filing schedule C.  I, too, am thoroughly exasperated with trying to decipher the IT SBD instructions.  A great deduction that we can't take because we can't figure out how to complete the form is worthless.  Has anyone seen instructions for the layman on how to complete this form?
  • I called the Ohio Department of Taxation and was told that I get 100% of the deduction.
  • I e-mailed the Ohio Dept of Taxation and got this reply, "The only instructions we have are are the ones on our website. We do have some FAQs regarding on www.tax.ohio.gov. If you have specific questions you can email us or call 1-800-282-1780. We can offer advice but be are not allowed to prepare this form for taxpayers. Also if you need additional help that we cannot offer we recommend consulting with a tax preparer."  No, I have not figured it out yet....
  • I found these simplified instructions supplied by Ayres Tax Seminars. Although it doesn't help with Part II (Appointment Formula) it does greatly simply Part I.  http://www.ayresats.com/downloads/Ohio_SBI_Guidance_Letter.pdf
  • Thank you for sharing kenk!  I will check that out.
  • Can someone please clarify?  is Line 1 (IT SBD) our NET profit?  I'm reading it as the money passed onto us after deductions...  basically, our earnings that we take to the bank, minus the cost of doing business.
  • I have to be honest, because TT excluded the Ohio SBD form, I'm going to drop TT and look for either other tax software next year or bite the bullet and get a CPA.  IMHO, $120 wasted on software that turned what should be a legal windfall into a major irritating headache.  TT product managers, take not of this feedback.  It is serious and it cost you my business (let alone all the others upset over this omission.)
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Yes. Anybody filing schedule C (or even C-EZ) qualifies for this incredible deduction.

  • Thank you for your answer.  I really appreciate it but I'm hoping you could you help with some further clarification...

    In the calculations area, when determining payroll and sales factor, it refers to a number of Exclusions in the instructions.

    I'm most concerned with one of the Sales Factor exclusions: "Receipts and any related gains or losses from the sale or other disposal of intangible property other than trademarks, trade names, patents, copyrights and similar intellectual property;"

    I write code for clients.  Is that revenue considered "intangible property other than..." and thus excluded from the sales factor?  Or is it included?  Also, is it considered in state sales because the work is done in state, or out of state because the client is out of state?

    Also, for the payroll factor, since I have 0 employees, do I get a "weighted ratio" of 0 for that section?  Or do I count myself as on the payroll, and thus get a weighted ratio of .2?
  • As you know this brand new this year. I haven't studied it yet and am unable to answer.
  • I did study it and I still don't know the answer.  If my tax preparer can't figure this out for me, what the hell did I just pay for?  And how do I get a refund for the TurboTax software that let me down so completely?
  • Did you figure this out?  I'm in the same situation and get .6 for the weighted ratio since I have no property or payroll but that just doesn't seem right.  I think it should be 1.0
  • Found this on the Ohio Tax FAQ (http://www.tax.ohio.gov/Business/SmallBusinessTaxDeduction/FAQs.aspx)

     21. I receive Ohio royalty income and have no property or payroll in Ohio or everywhere else. Are my royalties considered sales for purposes of the sales factor in the apportionment ratio on the IT SBD, part II?

    Yes. If any factor has a denominator (total everywhere figure) of zero, the weight given to the other factors must be proportionately increased so that the total weight given to the combined factors is 100%. Since your payroll and property factors both have a denominator of zero, the weight given to the sales factor should be 100%.

    Sounds like the ratio should be 1.0 (100%).
  • I called the Ohio Department of Taxation and was told I get 100% of the deduction.
  • Thanks to everyone who has contributed to answer this question. I also write software for contact customers in Ohio and had the same question. It really seems like Turbo Tax could have updated their Ohio module to handle this form.
  • I found these simplified instructions supplied by Ayres Tax Seminars. Although it doesn't help with Part II (Appointment Formula) it does greatly simply Part I.  http://www.ayresats.com/downloads/Ohio_SBI_Guidance_Letter.pdf
  • Can you explain your situation, and how it is 100%?  Thanks!
  • I still have a hard time understanding the Part II. Anyone has a clear explanation for this?
  • I ended up talking to someone at Ohio Dept. of Taxation to clarify this.  It's worth contacting them if you're really struggling with the Ohio IT SBD form as I was: http://www.tax.ohio.gov/contact_us.aspx  
    I submitted my question on their website and got a call back the next morning and the gentleman I spoke to was very helpful.  

    The following pertains to my unique situation.  Yours may be different.  I'm providing this information in the hope it may help someone figure out how to use this form to get the deduction, but please know that your situation may require filling out the form differently.

    From what I was told if you have a Schedule C on your federal return, then line 1 on the Ohio IT SBD is the value from line 12 on your 1040 federal form.  And line 9a of the IT SBD form corresponds to line 27 of your federal 1040.

    Regarding Part II of the form...

    I only have sales (no property or payroll with my business) so Part II lines 1 and 2 were all zeros for me.  Part II line 3 column 1 (Sales - Within Ohio) was the portion of my sales (line 1 from the IT SBD form) from within the state of Ohio.  This is an important point and one that was a source of confusion for me since I have a service based business that is conducted primarily online (web design/development) with clients not only in Ohio but across the country/world.  I was told to only count sales to clients that are in Ohio are for the "Within Ohio" in column 1 of line 3.

    Part II line 3 column 2 on the IT SBD (Sales - Total Everywhere) was the same value as line 1 of that form for me.

    Hope this helps someone.  Like I said, I think it's definitely worth contacting the Ohio Dept. of Taxation if you have questions.
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