H.B. 498 Summary

• Allows individual taxpayers age 70½ or older to elect a deduction for all unearned income (non-wage income such as dividends, interest, capital gains) under new division (A)(28) of section 5747.01.

• Reduces maximum effective tax rate on unearned income to 1% for eligible seniors by allowing the deduction while maintaining existing tax brackets on earned income and other taxable income.

• Modifies the tax calculation for seniors electing this deduction so personal exemptions apply first against adjusted gross income, with any excess applied against the deducted unearned income amount.

• Prohibits taxpayers who claim the unearned income deduction from also claiming the retirement income credit under section 5747.055 for the same taxable year.

• Applies to taxable years beginning in 2010 and thereafter, with income bracket thresholds adjusted annually for inflation beginning in 2010.