Ohio Self-Employed — IT 1040, Schedule IT BUS & CAT Assessment

Establish the taxpayer's Ohio residency status for the full year, confirm entity structure (sole proprietorship vs. disregarded SMLLC), and collect federal return inputs. Ohio IT 1040 starts from federal AGI (Form 1040, Line 11), so the federal return must be substantially complete before the state return can be prepared.

Bridge from federal AGI to Ohio AGI by identifying all required additions and subtractions. Common self-employed adjustments include subtracting Social Security income (Ohio fully exempts it), Ohio 529 contributions (up to $4,000 per beneficiary), and Ohio municipal bond interest, and adding back interest from other states' bonds or other Ohio add-back items.

Classify all income as either business income or nonbusiness income, then apply the Ohio Business Income Deduction. The first $250,000 of business income ($125,000 if Married Filing Separately) is excluded from Ohio tax via Schedule IT BUS; any excess is taxed at a flat 3% rate rather than the graduated brackets.

Apply the 2025 graduated nonbusiness income tax brackets (0% up to $26,050; 2.75% from $26,051 to $100,000; 3.125% above $100,000) to nonbusiness Ohio taxable income after personal exemptions. Compute available credits including the Ohio Earned Income Credit (10% of federal EITC, nonrefundable), joint filer credit, retirement income credit, and the municipal income tax credit.

Determine whether the taxpayer's Ohio taxable gross receipts (TGR) exceed the $6,000,000 Commercial Activity Tax threshold for 2025. For most self-employed filers the answer is no and no CAT action is needed; if the taxpayer was previously registered for CAT, cancellation via the Ohio Business Gateway should be confirmed. If TGR exceeds $6,000,000, compute CAT at 0.26% on the excess and prepare Form CAT 12.

Flag all Ohio municipal income tax obligations — Ohio cities (administered by RITA, CCA, or self-administered) levy income taxes at rates typically 1%–3% and self-employed individuals must file in their city of residence and any city where work was performed. This phase also checks school district income tax (SD 100) obligations, resolves any Ohio conformity questions, assembles the final Ohio IT 1040 package, and confirms the April 15, 2026 filing deadline or extension status.