Ohio Commercial Activity Tax Changes Coming in 2024 and 2025: What Business Owners Need to Know
If you are a business owner in Ohio, you may be interested in the recent changes to the commercial activity tax (CAT) that will take effect in 2024 and 2025. The CAT is a tax on the gross receipts of businesses with a presence in Ohio. Here are some of the key points you need to know:
- No more annual minimum tax: Starting in 2024, the CAT annual minimum tax of $150 to $2,600, depending on your gross receipts, will be eliminated. This means that you will only pay the CAT based on your taxable gross receipts over the exclusion amount for the calendar year.
- Higher exclusion amount: The exclusion amount is the amount of gross receipts that are not subject to the CAT. For 2024, the exclusion amount will increase from $1 million to $3 million. For 2025 and thereafter, the exclusion amount will increase to $6 million. This means that if your gross receipts are below the exclusion amount for the calendar year, you will not have to pay any CAT or file any return with the Department of Taxation.
- Same tax rate: The CAT rate of 0.26% will remain unchanged and will continue to apply to your taxable gross receipts over the exclusion amount for the calendar year. For example, if your gross receipts are $4 million in 2024, you will pay 0.26% x ($4 million - $3 million) = $2,600 in CAT. If your gross receipts are $8 million in 2025, you will pay 0.26% x ($8 million - $6 million) = $5,200 in CAT.
- Only quarterly filing: After the 2023 annual return, which is due May 10, 2024, annual filing will be eliminated. All CAT taxpayers will have to file quarterly returns for tax periods beginning on or after January 1, 2024. If your gross receipts are below the exclusion amount for the calendar year, you will not have to file any return, but you will have to cancel your CAT account with the Department of Taxation.
These changes are expected to benefit many small and medium-sized businesses in Ohio by reducing their tax burden and compliance costs. For more information, please visit the Ohio Department of Taxation website or contact them at 1-888-722-8829.