diff --git a/changelog.d/fix-oh-dependent-capital-gain.fixed.md b/changelog.d/fix-oh-dependent-capital-gain.fixed.md
new file mode 100644
index 00000000000..6bd6ce553e3
--- /dev/null
+++ b/changelog.d/fix-oh-dependent-capital-gain.fixed.md
@@ -0,0 +1 @@
+Exclude tax-unit dependents' qualifying capital gain deductions from the filers' Ohio AGI and modified AGI accounting.
diff --git a/changelog.d/fix-oh-modified-agi-addbacks.fixed.md b/changelog.d/fix-oh-modified-agi-addbacks.fixed.md
new file mode 100644
index 00000000000..0d38e9ee550
--- /dev/null
+++ b/changelog.d/fix-oh-modified-agi-addbacks.fixed.md
@@ -0,0 +1 @@
+Ohio now applies the business income deduction and the 3% tax on taxable business income, and modified adjusted gross income adds back the business income deduction and, from 2026, the qualifying capital gain deduction; personal exemptions and the exemption credit use modified adjusted gross income.
diff --git a/policyengine_us/parameters/gov/states/oh/tax/income/business_income/rate.yaml b/policyengine_us/parameters/gov/states/oh/tax/income/business_income/rate.yaml
new file mode 100644
index 00000000000..b13ae13ea20
--- /dev/null
+++ b/policyengine_us/parameters/gov/states/oh/tax/income/business_income/rate.yaml
@@ -0,0 +1,14 @@
+description: Ohio taxes taxable business income at this flat rate.
+values:
+  2021-01-01: 0.03
+metadata:
+  unit: /1
+  period: year
+  label: Ohio business income tax rate
+  reference:
+    - title: R.C. 5747.02(A)(4)(a)
+      href: https://codes.ohio.gov/ohio-revised-code/section-5747.02
+    - title: 2024 Ohio Schedule of Business Income, line 16
+      href: https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf#page=5
+    - title: 2024 Ohio IT 1040 Instructions, Ohio Schedule of Business Income, Part 3
+      href: https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/it1040-booklet.pdf#page=27
diff --git a/policyengine_us/parameters/gov/states/oh/tax/income/business_income/sources.yaml b/policyengine_us/parameters/gov/states/oh/tax/income/business_income/sources.yaml
new file mode 100644
index 00000000000..ebb18465230
--- /dev/null
+++ b/policyengine_us/parameters/gov/states/oh/tax/income/business_income/sources.yaml
@@ -0,0 +1,25 @@
+description: Ohio counts these income sources as business income on the Schedule of Business Income.
+values:
+  2021-01-01:
+    - self_employment_income # Schedule C, line 2
+    - sstb_self_employment_income # Schedule C, line 2
+    - partnership_s_corp_income # Schedule E pass-through income, line 4
+    - farm_operations_income # Schedule F, line 6
+metadata:
+  unit: list
+  period: year
+  label: Ohio business income sources
+  reference:
+    # "Generally, income recognized by a sole proprietorship or pass-through
+    # entity is business income." Interest, dividends, capital gains, rents
+    # (including farm rent), royalties, trust income and Form 4797 gains are
+    # business income only when they arise in a trade or business, which the
+    # model cannot observe, so they are treated as nonbusiness income. Wages
+    # and guaranteed payments a pass-through pays a 20%-or-more owner
+    # (schedule line 5) are not modeled.
+    - title: R.C. 5747.01(B) and (C)
+      href: https://codes.ohio.gov/ohio-revised-code/section-5747.01
+    - title: 2024 Ohio IT 1040 Instructions, Definitions and Examples of Business and Nonbusiness Income
+      href: https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/it1040-booklet.pdf#page=11
+    - title: 2024 Ohio IT 1040 Instructions, Ohio Schedule of Business Income
+      href: https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/it1040-booklet.pdf#page=26
diff --git a/policyengine_us/parameters/gov/states/oh/tax/income/deductions/business_income/cap.yaml b/policyengine_us/parameters/gov/states/oh/tax/income/deductions/business_income/cap.yaml
new file mode 100644
index 00000000000..592da67014c
--- /dev/null
+++ b/policyengine_us/parameters/gov/states/oh/tax/income/deductions/business_income/cap.yaml
@@ -0,0 +1,25 @@
+description: Ohio limits the business income deduction to this amount, by filing status.
+metadata:
+  propagate_metadata_to_children: true
+  label: Ohio business income deduction cap
+  period: year
+  unit: currency-USD
+  breakdown:
+    - filing_status
+  reference:
+    - title: R.C. 5747.01(A)(28)
+      href: https://codes.ohio.gov/ohio-revised-code/section-5747.01
+    - title: 2024 Ohio Schedule of Business Income, line 12
+      href: https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf#page=5
+    - title: 2021 Ohio IT 1040 Instructions, Business Income
+      href: https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2021/pit-it1040-booklet.pdf#page=10
+SINGLE:
+  2021-01-01: 250_000
+JOINT:
+  2021-01-01: 250_000
+SEPARATE:
+  2021-01-01: 125_000
+HEAD_OF_HOUSEHOLD:
+  2021-01-01: 250_000
+SURVIVING_SPOUSE:
+  2021-01-01: 250_000
diff --git a/policyengine_us/parameters/gov/states/oh/tax/income/deductions/deductions.yaml b/policyengine_us/parameters/gov/states/oh/tax/income/deductions/deductions.yaml
index 80af64bd48d..55b555e02bc 100644
--- a/policyengine_us/parameters/gov/states/oh/tax/income/deductions/deductions.yaml
+++ b/policyengine_us/parameters/gov/states/oh/tax/income/deductions/deductions.yaml
@@ -11,6 +11,8 @@ values:
     - oh_unreimbursed_medical_care_expense_deduction_person
     - us_govt_interest_person
     - salt_refund_income
+    - oh_business_income_deduction_person # Schedule of Adjustments, line 13
+    - oh_qualifying_capital_gain_deduction # R.C. 5747.01(A)(34), from 2026
 
 metadata:
   unit: list
diff --git a/policyengine_us/parameters/gov/states/oh/tax/income/deductions/qualifying_capital_gain/in_effect.yaml b/policyengine_us/parameters/gov/states/oh/tax/income/deductions/qualifying_capital_gain/in_effect.yaml
new file mode 100644
index 00000000000..ff0d285f41d
--- /dev/null
+++ b/policyengine_us/parameters/gov/states/oh/tax/income/deductions/qualifying_capital_gain/in_effect.yaml
@@ -0,0 +1,13 @@
+description: Ohio allows the qualifying capital gain deduction if this is true.
+values:
+  2021-01-01: false
+  2026-01-01: true
+metadata:
+  unit: bool
+  period: year
+  label: Ohio qualifying capital gain deduction in effect
+  reference:
+    - title: R.C. 5747.79(B)
+      href: https://codes.ohio.gov/ohio-revised-code/section-5747.79
+    - title: R.C. 5747.01(A)(34)
+      href: https://codes.ohio.gov/ohio-revised-code/section-5747.01
diff --git a/policyengine_us/reforms/states/oh/dependent_exemption/oh_dependent_exemption_reform.py b/policyengine_us/reforms/states/oh/dependent_exemption/oh_dependent_exemption_reform.py
index 677c648e879..28154def134 100644
--- a/policyengine_us/reforms/states/oh/dependent_exemption/oh_dependent_exemption_reform.py
+++ b/policyengine_us/reforms/states/oh/dependent_exemption/oh_dependent_exemption_reform.py
@@ -34,8 +34,9 @@ def formula(tax_unit, period, parameters):
             # Negative amount sentinel = use the discrete MAGI-stepped schedule
             # (no-op default, since the contrib schedule mirrors the baseline);
             # a value >= 0 applies a flat per-dependent amount instead.
-            agi = tax_unit("oh_agi", period)
-            stepped_per = p.schedule.amount.calc(agi)
+            # The baseline schedule is stepped by modified AGI (R.C. 5747.025).
+            modified_agi = tax_unit("oh_modified_agi", period)
+            stepped_per = p.schedule.amount.calc(modified_agi)
             per_dependent = where(p.amount < 0, stepped_per, p.amount)
             return count * per_dependent
 
@@ -77,8 +78,8 @@ class oh_personal_exemptions(Variable):
 
         def formula(tax_unit, period, parameters):
             p_base = parameters(period).gov.states.oh.tax.income.exemptions.personal
-            agi = tax_unit("oh_agi", period)
-            per_person = p_base.amount.calc(agi)
+            modified_agi = tax_unit("oh_modified_agi", period)
+            per_person = p_base.amount.calc(modified_agi)
 
             # Personal portion = all eligible persons minus the dependents that
             # are separated out (over-age dependents stay in the personal count).
diff --git a/policyengine_us/tests/core/test_oh_filer_deduction_invariants.py b/policyengine_us/tests/core/test_oh_filer_deduction_invariants.py
new file mode 100644
index 00000000000..2d9a3f66bfc
--- /dev/null
+++ b/policyengine_us/tests/core/test_oh_filer_deduction_invariants.py
@@ -0,0 +1,229 @@
+"""Ohio deductions and addbacks use income on the filers' return.
+
+R.C. 5747.79(A)(1) permits qualifying capital gain only to the extent it
+has not been excluded from federal or Ohio AGI; subsection (B) limits the
+deduction to deductible payroll. A dependent's income is excluded from the
+filers' federal AGI. R.C. 5747.01(A)(28) limits the business deduction to
+business income in federal AGI, capped at $250,000 for single and joint
+returns. Subsection (II) adds both deductions back to Ohio modified AGI.
+
+Sources: https://codes.ohio.gov/ohio-revised-code/section-5747.79 and
+https://codes.ohio.gov/ohio-revised-code/section-5747.01.
+
+Each Hypothesis example evaluates six tax units and their twins together:
+one or two filers and one through three dependent children. Actual capital gains and
+S-corporation income avoid unrelated loss allocation. An independent sum
+over filers checks federal AGI, the deductions and Ohio AGI, then a twin
+tax unit with dependent gain and business inputs zeroed checks that those
+inputs cannot change the filers' deductions or either Ohio AGI measure.
+"""
+
+import numpy as np
+from hypothesis import HealthCheck, given, settings
+from hypothesis import strategies as st
+
+from policyengine_us import Simulation
+
+YEAR = 2026
+TOLERANCE = 0.01
+DEPENDENT_INPUTS = (
+    "long_term_capital_gains",
+    "s_corp_income",
+    "oh_qualifying_capital_gain",
+    "oh_qualifying_capital_gain_deductible_payroll",
+)
+PERSON_OUTPUTS = (
+    "adjusted_gross_income_person",
+    "oh_business_income_deduction_person",
+    "oh_qualifying_capital_gain_deduction",
+)
+UNIT_OUTPUTS = (
+    "adjusted_gross_income",
+    "oh_business_income_deduction",
+    "oh_agi",
+    "oh_modified_agi",
+)
+
+
+@st.composite
+def person_amounts(draw, *, dependent):
+    return {
+        "employment_income": draw(st.integers(1, 100_000)),
+        "s_corp_income": draw(st.integers(1 if dependent else 0, 350_000)),
+        "long_term_capital_gains": draw(st.integers(1 if dependent else 0, 400_000)),
+        "oh_qualifying_capital_gain": draw(
+            st.integers(1 if dependent else -50_000, 400_000)
+        ),
+        "oh_qualifying_capital_gain_deductible_payroll": draw(
+            st.integers(1 if dependent else -50_000, 400_000)
+        ),
+    }
+
+
+@st.composite
+def tax_unit_batch(draw):
+    return [
+        {
+            "filers": [draw(person_amounts(dependent=False)) for _ in range(n_filers)],
+            "dependents": [
+                draw(person_amounts(dependent=True)) for _ in range(n_dependents)
+            ],
+        }
+        for n_filers in (1, 2)
+        for n_dependents in (1, 2, 3)
+    ]
+
+
+def _run(units):
+    situation = {
+        "people": {},
+        "tax_units": {},
+        "households": {},
+        "marital_units": {},
+    }
+    # Evaluate each unit and its twin in one vectorized simulation.
+    for i, unit in enumerate(units + units):
+        members, filers = [], []
+        for j, amounts in enumerate(unit["filers"] + unit["dependents"]):
+            dependent = j >= len(unit["filers"])
+            name = f"person_{i}_{j}"
+            values = {
+                **amounts,
+                "age": 10 if dependent else 45,
+                "is_tax_unit_head": j == 0,
+                "is_tax_unit_spouse": j == 1 and not dependent,
+                "is_tax_unit_dependent": dependent,
+            }
+            if dependent and i >= len(units):
+                values.update({variable: 0 for variable in DEPENDENT_INPUTS})
+            situation["people"][name] = {
+                variable: {YEAR: value} for variable, value in values.items()
+            }
+            members.append(name)
+            if dependent:
+                situation["marital_units"][name] = {"members": [name]}
+            else:
+                filers.append(name)
+        situation["marital_units"][f"filers_{i}"] = {"members": filers}
+        situation["tax_units"][f"tax_unit_{i}"] = {
+            "members": members,
+            "filing_status": {YEAR: "JOINT" if len(filers) == 2 else "SINGLE"},
+        }
+        situation["households"][f"household_{i}"] = {
+            "members": members,
+            "state_code": {YEAR: "OH"},
+        }
+    simulation = Simulation(situation=situation)
+    outputs = {
+        variable: np.asarray(simulation.calculate(variable, YEAR), dtype=float)
+        for variable in PERSON_OUTPUTS + UNIT_OUTPUTS
+    }
+    outputs["dependent"] = np.asarray(
+        simulation.calculate("is_tax_unit_dependent", YEAR), dtype=bool
+    )
+    index = simulation.populations["tax_unit"].members_entity_id
+    n_people = len(index) // 2
+    runs = []
+    for half in (0, 1):
+        results = {}
+        for variable in PERSON_OUTPUTS + ("dependent",):
+            results[variable] = outputs[variable][
+                half * n_people : (half + 1) * n_people
+            ]
+        for variable in UNIT_OUTPUTS:
+            results[variable] = outputs[variable][
+                half * len(units) : (half + 1) * len(units)
+            ]
+        results["unit"] = index[half * n_people : (half + 1) * n_people] - half * len(
+            units
+        )
+        runs.append(results)
+    return runs
+
+
+def _unit_sum(run, amounts):
+    return np.bincount(
+        run["unit"], weights=amounts, minlength=len(run["adjusted_gross_income"])
+    )
+
+
+@settings(
+    max_examples=5,
+    deadline=None,
+    derandomize=True,
+    suppress_health_check=[HealthCheck.too_slow, HealthCheck.data_too_large],
+)
+@given(tax_unit_batch())
+def test_dependent_income_cannot_change_ohio_filer_deductions(units):
+    run, zeroed = _run(units)
+    filer = ~run["dependent"]
+    people = [
+        person for unit in units for person in unit["filers"] + unit["dependents"]
+    ]
+
+    def inputs(variable):
+        return np.array([person[variable] for person in people], dtype=float)
+
+    expected_person_agi = filer * (
+        inputs("employment_income")
+        + inputs("s_corp_income")
+        + inputs("long_term_capital_gains")
+    )
+    expected_agi = _unit_sum(run, expected_person_agi)
+    expected_business = np.minimum(
+        250_000, _unit_sum(run, filer * inputs("s_corp_income"))
+    )
+    expected_capital_person = filer * np.minimum.reduce(
+        [
+            np.maximum(0, inputs("oh_qualifying_capital_gain")),
+            inputs("long_term_capital_gains"),
+            np.maximum(0, inputs("oh_qualifying_capital_gain_deductible_payroll")),
+        ]
+    )
+    expected_capital = _unit_sum(run, expected_capital_person)
+
+    for results in (run, zeroed):
+        for variable in PERSON_OUTPUTS:
+            np.testing.assert_array_equal(results[variable][run["dependent"]], 0)
+        np.testing.assert_allclose(
+            results["adjusted_gross_income_person"],
+            expected_person_agi,
+            atol=TOLERANCE,
+        )
+        np.testing.assert_allclose(
+            results["adjusted_gross_income"], expected_agi, atol=TOLERANCE
+        )
+        np.testing.assert_allclose(
+            results["oh_qualifying_capital_gain_deduction"],
+            expected_capital_person,
+            atol=TOLERANCE,
+        )
+        np.testing.assert_allclose(
+            results["oh_business_income_deduction"],
+            expected_business,
+            atol=TOLERANCE,
+        )
+        np.testing.assert_allclose(
+            _unit_sum(results, results["oh_business_income_deduction_person"]),
+            expected_business,
+            atol=TOLERANCE,
+        )
+        np.testing.assert_allclose(
+            results["oh_agi"],
+            expected_agi - expected_business - expected_capital,
+            atol=TOLERANCE,
+        )
+        np.testing.assert_allclose(
+            results["oh_modified_agi"], expected_agi, atol=TOLERANCE
+        )
+    for variable in UNIT_OUTPUTS:
+        np.testing.assert_allclose(
+            run[variable], zeroed[variable], atol=TOLERANCE, err_msg=variable
+        )
+    for variable in PERSON_OUTPUTS:
+        np.testing.assert_allclose(
+            run[variable][filer],
+            zeroed[variable][filer],
+            atol=TOLERANCE,
+            err_msg=variable,
+        )
diff --git a/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/business_income/oh_business_income_deduction.yaml b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/business_income/oh_business_income_deduction.yaml
new file mode 100644
index 00000000000..974a1adef26
--- /dev/null
+++ b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/business_income/oh_business_income_deduction.yaml
@@ -0,0 +1,188 @@
+# Ohio Schedule of Business Income (2024 IT 1040 bundle, PDF p. 5) and IT 1040
+# lines 1-8c (PDF p. 1); 2024 Ohio IT 1040 instructions, pp. 16-18 and 26-27.
+# 2024 nonbusiness brackets: 0 up to 26,050; 360.69 + 2.75% of the excess over
+# 26,050 up to 100,000; 2,394.32 + 3.50% of the excess over 100,000.
+# Exemption by MAGI: 2,400 (40,000 or less), 2,150 (to 80,000), 1,900 (above).
+
+- name: Pass-through income under the cap is fully deducted
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        employment_income: 200_000
+        s_corp_income: 100_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: OH
+  output:
+    # Schedule lines 4 and 10: 100_000; line 11: min(100_000, 300_000);
+    # line 13: min(100_000, 250_000).
+    oh_business_income: 100_000
+    oh_business_income_deduction: 100_000
+    # IT 1040 line 3 = 300_000 - 100_000.
+    oh_agi: 200_000
+    # MAGI = Ohio AGI + business income deduction (R.C. 5747.01(II)).
+    oh_modified_agi: 300_000
+    oh_personal_exemptions: 1_900
+    # Line 5 = 198_100; line 6 = 0; line 7 = 198_100.
+    oh_taxable_income: 198_100
+    oh_taxable_business_income: 0
+    oh_taxable_nonbusiness_income: 198_100
+    # Line 8a = 2_394.32 + 3.5% * 98_100 = 5_827.82; line 8b = 0.
+    oh_income_tax_before_non_refundable_credits: 5_827.82
+
+- name: Business income above the cap is taxed at the flat 3% rate
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        employment_income: 50_000
+        s_corp_income: 400_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: OH
+  output:
+    # Line 11 = 400_000; line 13 = 250_000; line 14 = 150_000.
+    oh_business_income_deduction: 250_000
+    oh_agi: 200_000
+    oh_modified_agi: 450_000
+    # Line 5 = 200_000 - 1_900 = 198_100; line 15 = min(150_000, 198_100).
+    oh_taxable_business_income: 150_000
+    # Line 7 = 198_100 - 150_000 = 48_100.
+    oh_taxable_nonbusiness_income: 48_100
+    # Line 16 / 8b = 3% * 150_000.
+    oh_business_income_tax: 4_500
+    # Line 8a = 360.69 + 2.75% * 22_050 = 967.065; line 8c = 5_467.065.
+    oh_income_tax_before_non_refundable_credits: 5_467.065
+
+- name: Married filing separately is capped at 125,000
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        s_corp_income: 200_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+        filing_status: SEPARATE
+    households:
+      household:
+        members: [person1]
+        state_code: OH
+  output:
+    # Line 12: 125_000 for married filing separately.
+    oh_business_income_deduction: 125_000
+
+- name: Business losses net against business gains on the schedule
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        employment_income: 50_000
+        self_employment_income: -15_000
+      person2:
+        age: 45
+        self_employment_income: 10_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: OH
+  output:
+    # 2024 instructions, line 2 example: "Sam has a business that incurs a
+    # loss of -$15,000. Sam's spouse Suzy has a separate business that
+    # generates a profit of $10,000. ... they must report -$5,000 on this
+    # line." Line 11 is then zero: no deduction.
+    oh_business_income: -5_000
+    oh_business_income_deduction: 0
+    oh_business_income_deduction_person: [0, 0]
+
+- name: The deduction is limited to federal adjusted gross income
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        s_corp_income: 100_000
+        rental_income: -80_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: OH
+  output:
+    # Line 10 = 100_000 (the rental loss is nonbusiness); line 11 = the
+    # lesser of line 10 or federal AGI (20_000).
+    oh_business_income: 100_000
+    oh_business_income_deduction: 20_000
+    oh_agi: 0
+
+- name: Exemptions above nonbusiness income reduce taxable business income
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        s_corp_income: 300_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: OH
+  output:
+    # Line 3 = 50_000; MAGI 300_000 so line 4 = 1_900; line 5 = 48_100.
+    # Line 14 = 50_000; line 15 = min(50_000, 48_100) = 48_100
+    # (R.C. 5747.02(A)(4)(b)); line 7 = 0.
+    oh_taxable_business_income: 48_100
+    oh_taxable_nonbusiness_income: 0
+    # Line 8a = 0; line 8b = 3% * 48_100 = 1_443.
+    oh_income_tax_before_non_refundable_credits: 1_443
+
+- name: Each spouse's deduction comes from their own business income
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        s_corp_income: 300_000
+      person2:
+        age: 45
+        self_employment_income: 0
+        farm_operations_income: 100_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: OH
+  output:
+    # Line 10 = 400_000; line 13 = 250_000, taken from each spouse's business
+    # income in proportion: 3/4 and 1/4.
+    oh_business_income_person: [300_000, 100_000]
+    oh_business_income_deduction_person: [187_500, 62_500]
diff --git a/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_eligible.yaml b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_eligible.yaml
index 6c732cc363a..e0c8d5ec126 100644
--- a/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_eligible.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_eligible.yaml
@@ -60,3 +60,34 @@
         state_code: OH
   output:
     oh_joint_filing_credit_eligible: true
+
+- name: Business income deducted from Ohio AGI is not qualifying income (2025 instructions example)
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        employment_income: 50_000
+        taxable_interest_income: 5_000
+      person2:
+        age: 45
+        s_corp_income: 40_000
+        taxable_social_security: 20_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: OH
+  output:
+    # 2025 Ohio IT 1040 instructions, Schedule of Credits line 12 (PDF p. 29):
+    # "Kevin has $50,000 of wage income and $5,000 of interest income. Krysten
+    # has $40,000 of business income and $20,000 of taxable Social Security
+    # benefits. While Kevin has $50,000 of qualifying income (his wages),
+    # Krysten has no qualifying income because her business income and
+    # taxable Social Security benefits were both deducted in calculating their
+    # Ohio AGI. Therefore, they are not entitled to the joint filing credit."
+    oh_joint_filing_credit_qualifying_income: [50_000, 0]
+    oh_joint_filing_credit_eligible: false
diff --git a/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_qualifying_income.yaml b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_qualifying_income.yaml
index 158417b1341..b3c1e4b597f 100644
--- a/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_qualifying_income.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_qualifying_income.yaml
@@ -27,3 +27,31 @@
     oh_joint_filing_credit_agi_subtractions: 10_000
   output:
     oh_joint_filing_credit_qualifying_income: -6_000
+
+- name: A qualifying capital gain deducted from Ohio AGI is not excluded again
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 50
+        employment_income: 600
+        long_term_capital_gains: 100_000
+        oh_qualifying_capital_gain: 100_000
+        oh_qualifying_capital_gain_deductible_payroll: 60_000
+      person2:
+        age: 50
+        employment_income: 50_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: OH
+  output:
+    # Person 1's Ohio AGI is 100_600 - 60_000 = 40_600, of which 40_000 is
+    # capital gain still in Ohio AGI. R.C. 5747.05(E)(1) excludes capital gains
+    # from "adjusted gross income", so qualifying income is 600, not
+    # 40_600 - 100_000.
+    oh_joint_filing_credit_qualifying_income: [600, 50_000]
diff --git a/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/integration.yaml b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/integration.yaml
index 98420dc467f..4e61fb816ae 100644
--- a/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/integration.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/integration.yaml
@@ -87,8 +87,17 @@
       household:
         members: [person1, person2, person3, person4, person5]
         state_fips: 39  # OH
-  output:  # expected results from patched TAXSIM35 2024-02-21 version
-    oh_income_tax: 13_756.36
+  output:
+    # Patched TAXSIM35 (2024-02-21) gives 13_756.36, but it does not apply
+    # Ohio's business income deduction (R.C. 5747.01(A)(28)). With it: the
+    # Schedule C income of 160_010 is deducted in full (Schedule of Business
+    # Income lines 10-13); Ohio AGI 242_927.34; MAGI 402_937.34, so five
+    # exemptions of 1_900; lines 5 and 7 = 233_427.34; line 8a = 8_021.96 in
+    # the model (the 2021 table's $346.16 base gives 8_021.87; the model's
+    # first-bracket rate gives a $0.09 higher base, as before this change);
+    # joint filing credit 5% = 401.10; tax 7_620.86.
+    oh_business_income_deduction: 160_010
+    oh_income_tax: 7_620.86
 
 - name: Tax unit with taxsimid 97470 in j21.its.csv and j21.ots.csv
   absolute_error_margin: 0.01
@@ -121,8 +130,15 @@
       household:
         members: [person1, person2, person3]
         state_fips: 39  # OH
-  output:  # expected results from patched TAXSIM35 2024-03-09 version
-    oh_income_tax: 2_818.55
+  output:
+    # Patched TAXSIM35 (2024-03-09) gives 2_818.55, but it does not apply
+    # Ohio's business income deduction (R.C. 5747.01(A)(28)). With it: the
+    # Schedule C income of 28_010 is deducted in full; Ohio AGI 80_081.16;
+    # MAGI 108_091.16, so three exemptions of 1_900; lines 5 and 7 =
+    # 74_381.16; line 8a = 1_850.54 in the model (1_850.45 on the 2021 table,
+    # the same pre-existing $0.09 base difference).
+    oh_business_income_deduction: 28_010
+    oh_income_tax: 1_850.54
 
 - name: 0-OH.yaml
   absolute_error_margin: 2
diff --git a/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/oh_modified_agi.yaml b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/oh_modified_agi.yaml
new file mode 100644
index 00000000000..d5ff7d5d87b
--- /dev/null
+++ b/policyengine_us/tests/policy/baseline/gov/states/oh/tax/income/oh_modified_agi.yaml
@@ -0,0 +1,147 @@
+- name: Modified AGI adds back the business income deduction, and exemptions use it
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        employment_income: 30_000
+      person2:
+        age: 45
+        s_corp_income: 30_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: OH
+  output:
+    # 2024 MAGI worksheet (instructions p. 40): line 1 Ohio AGI 30_000 plus
+    # line 2 business income deduction 30_000 = 60_000.
+    oh_agi: 30_000
+    oh_modified_agi: 60_000
+    # The exemption is set by MAGI (R.C. 5747.025): 2 * 2_150. Ohio AGI of
+    # 30_000 would give 2 * 2_400.
+    oh_personal_exemptions: 4_300
+    # Exemption credit: MAGI less exemptions (55_700) is not under 30_000.
+    oh_exemption_credit_potential: 0
+    # Line 5 = 25_700; line 7 = 25_700, at or below 26_050: no tax.
+    oh_taxable_nonbusiness_income: 25_700
+    oh_income_tax_before_non_refundable_credits: 0
+
+- name: From 2026 the qualifying capital gain deduction is taken and added back
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 60
+        long_term_capital_gains: 500_000
+        oh_qualifying_capital_gain: 500_000
+        oh_qualifying_capital_gain_deductible_payroll: 300_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: OH
+  output:
+    # R.C. 5747.79(B): the lesser of the qualifying capital gain or the
+    # deductible payroll. R.C. 5747.01(II) adds it back to MAGI.
+    oh_qualifying_capital_gain_deduction: 300_000
+    oh_agi: 200_000
+    oh_modified_agi: 500_000
+
+- name: Before 2026 there is no qualifying capital gain deduction
+  period: 2025
+  input:
+    people:
+      person1:
+        age: 60
+        long_term_capital_gains: 500_000
+        oh_qualifying_capital_gain: 500_000
+        oh_qualifying_capital_gain_deductible_payroll: 300_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: OH
+  output:
+    oh_qualifying_capital_gain_deduction: 0
+    oh_modified_agi: 500_000
+
+- name: A dependent's qualifying gain stays off the filer's Ohio return
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      parent:
+        age: 45
+        is_tax_unit_head: true
+        employment_income: 60_000
+      child:
+        age: 15
+        is_tax_unit_dependent: true
+        long_term_capital_gains: 100_000
+        oh_qualifying_capital_gain: 100_000
+        oh_qualifying_capital_gain_deductible_payroll: 80_000
+    tax_units:
+      tax_unit:
+        members: [parent, child]
+    households:
+      household:
+        members: [parent, child]
+        state_code: OH
+  output:
+    # R.C. 5747.79(A)(1), (B): the child's gain is outside the filer's
+    # federal AGI and cannot generate a deduction on this return.
+    adjusted_gross_income_person: [60_000, 0]
+    adjusted_gross_income: 60_000
+    oh_qualifying_capital_gain_deduction: [0, 0]
+    oh_agi: 60_000
+    # R.C. 5747.01(II) adds back only deductions actually taken.
+    oh_modified_agi: 60_000
+
+- name: Filer business and qualifying gain deductions exclude dependent income
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    people:
+      parent:
+        age: 45
+        is_tax_unit_head: true
+        employment_income: 60_000
+        s_corp_income: 40_000
+        long_term_capital_gains: 50_000
+        oh_qualifying_capital_gain: 50_000
+        oh_qualifying_capital_gain_deductible_payroll: 20_000
+      child:
+        age: 15
+        is_tax_unit_dependent: true
+        s_corp_income: 150_000
+        long_term_capital_gains: 100_000
+        oh_qualifying_capital_gain: 100_000
+        oh_qualifying_capital_gain_deductible_payroll: 80_000
+    tax_units:
+      tax_unit:
+        members: [parent, child]
+    households:
+      household:
+        members: [parent, child]
+        state_code: OH
+  output:
+    adjusted_gross_income_person: [150_000, 0]
+    adjusted_gross_income: 150_000
+    # Schedule of Business Income includes only the filer's income.
+    oh_business_income_person: [40_000, 0]
+    oh_business_income_deduction: 40_000
+    oh_business_income_deduction_person: [40_000, 0]
+    oh_qualifying_capital_gain_deduction: [20_000, 0]
+    oh_deductions: [60_000, 0]
+    # Ohio AGI = federal AGI - business deduction - qualifying gain deduction.
+    oh_agi: 90_000
+    oh_modified_agi: 150_000
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income.py b/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income.py
new file mode 100644
index 00000000000..9307614a295
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income.py
@@ -0,0 +1,17 @@
+from policyengine_us.model_api import *
+
+
+class oh_business_income(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Ohio business income"
+    documentation = "Ohio Schedule of Business Income, line 10."
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.01",
+        "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf#page=5",
+    )
+    defined_for = StateCode.OH
+
+    adds = ["oh_business_income_person"]
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income_person.py b/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income_person.py
new file mode 100644
index 00000000000..faa55e64b0a
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income_person.py
@@ -0,0 +1,23 @@
+from policyengine_us.model_api import *
+
+
+class oh_business_income_person(Variable):
+    value_type = float
+    entity = Person
+    label = "Ohio business income for each filer"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.01",
+        # 2024 Ohio IT 1040 instructions, Ohio Schedule of Business Income
+        "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/it1040-booklet.pdf#page=26",
+    )
+    defined_for = StateCode.OH
+
+    def formula(person, period, parameters):
+        p = parameters(period).gov.states.oh.tax.income.business_income
+        # The schedule lists the business income "that you (and your spouse,
+        # if filing jointly) received"; a dependent's income is on the
+        # dependent's own return. Losses net against gains.
+        not_dependent = ~person("is_tax_unit_dependent", period)
+        return not_dependent * add(person, period, p.sources)
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income_tax.py b/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income_tax.py
new file mode 100644
index 00000000000..e4785cbdb78
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_business_income_tax.py
@@ -0,0 +1,22 @@
+from policyengine_us.model_api import *
+
+
+class oh_business_income_tax(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Ohio business income tax"
+    documentation = (
+        "Ohio Schedule of Business Income, line 16, and Ohio IT 1040, line 8b."
+    )
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        # R.C. 5747.02(A)(4)(a)
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.02",
+        "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf#page=5",
+    )
+    defined_for = StateCode.OH
+
+    def formula(tax_unit, period, parameters):
+        p = parameters(period).gov.states.oh.tax.income.business_income
+        return tax_unit("oh_taxable_business_income", period) * p.rate
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_taxable_business_income.py b/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_taxable_business_income.py
new file mode 100644
index 00000000000..73f3b258208
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/business_income/oh_taxable_business_income.py
@@ -0,0 +1,32 @@
+from policyengine_us.model_api import *
+
+
+class oh_taxable_business_income(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Ohio taxable business income"
+    documentation = (
+        "Ohio Schedule of Business Income, line 15, and Ohio IT 1040, line 6."
+    )
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        # R.C. 5747.02(A)(4)
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.02",
+        "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf#page=5",
+    )
+    defined_for = StateCode.OH
+
+    def formula(tax_unit, period, parameters):
+        # Line 11
+        business_income = tax_unit("oh_business_income", period)
+        federal_agi = tax_unit("adjusted_gross_income", period)
+        deductible = max_(min_(business_income, federal_agi), 0)
+        # Line 14: business income above the deduction.
+        deduction = tax_unit("oh_business_income_deduction", period)
+        excess = deductible - deduction
+        # Line 15: no more than the Ohio income tax base (IT 1040 line 5), so
+        # exemptions that exceed nonbusiness income reduce taxable business
+        # income (R.C. 5747.02(A)(4)(b)).
+        income_tax_base = tax_unit("oh_taxable_income", period)
+        return max_(min_(excess, income_tax_base), 0)
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_potential.py b/policyengine_us/variables/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_potential.py
index 80bce6dca34..ed762da80bd 100644
--- a/policyengine_us/variables/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_potential.py
+++ b/policyengine_us/variables/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_potential.py
@@ -15,11 +15,10 @@ def formula(tax_unit, period, parameters):
             "oh_tax_before_joint_filing_credit", period
         )
         p = parameters(period).gov.states.oh.tax.income.credits.joint_filing
-        # Ohio uses MAGI for the credit computation, which is Ohio AGI with
-        # the addition of the business income deduction, which is currently not included in the model,
-        # hence, we use the Ohio AGI for the credit computation
-        oh_agi = tax_unit("oh_modified_agi", period)
+        # The percentage depends on modified adjusted gross income less
+        # exemptions.
+        modified_agi = tax_unit("oh_modified_agi", period)
         exemptions = tax_unit("oh_personal_exemptions", period)
-        agi_less_exepmtions = max_(oh_agi - exemptions, 0)
-        percentage = p.rate.calc(agi_less_exepmtions)
+        modified_agi_less_exemptions = max_(modified_agi - exemptions, 0)
+        percentage = p.rate.calc(modified_agi_less_exemptions)
         return min_(tax_before_joint_filing_credit * percentage, p.cap)
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_qualifying_income.py b/policyengine_us/variables/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_qualifying_income.py
index 15c7befde23..cc0f1dfda6c 100644
--- a/policyengine_us/variables/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_qualifying_income.py
+++ b/policyengine_us/variables/gov/states/oh/tax/income/credits/joint_filing_credit/oh_joint_filing_credit_qualifying_income.py
@@ -15,8 +15,17 @@ class oh_joint_filing_credit_qualifying_income(Variable):
 
     def formula(person, period, parameters):
         agi = person("oh_agi_person", period)
-        # Prevent negative subtractions from acting as additions
-        subtractions = max_(
-            0, person("oh_joint_filing_credit_agi_subtractions", period)
+        # Interest, dividends, capital gains and rents are excluded only to
+        # the extent included in Ohio AGI (R.C. 5747.05(E)(1)). A qualifying
+        # capital gain deducted under R.C. 5747.01(A)(34) is already out of
+        # Ohio AGI, so it is not excluded again.
+        # Capped at the capital gains reported, so a directly set multi-entity
+        # deduction cannot cancel the other exclusions.
+        deducted_gain = min_(
+            person("oh_qualifying_capital_gain_deduction", period),
+            max_(person("capital_gains", period), 0),
         )
+        excluded = person("oh_joint_filing_credit_agi_subtractions", period)
+        # Prevent negative subtractions from acting as additions
+        subtractions = max_(0, excluded - deducted_gain)
         return agi - subtractions
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/credits/oh_exemption_credit_potential.py b/policyengine_us/variables/gov/states/oh/tax/income/credits/oh_exemption_credit_potential.py
index 9fc6c4fd61e..024f5431b13 100644
--- a/policyengine_us/variables/gov/states/oh/tax/income/credits/oh_exemption_credit_potential.py
+++ b/policyengine_us/variables/gov/states/oh/tax/income/credits/oh_exemption_credit_potential.py
@@ -15,11 +15,12 @@ class oh_exemption_credit_potential(Variable):
     def formula(tax_unit, period, parameters):
         p = parameters(period).gov.states.oh.tax.income.credits.exemption
 
-        agi = tax_unit("oh_agi", period)
+        # Modified adjusted gross income less exemptions (R.C. 5747.022).
+        modified_agi = tax_unit("oh_modified_agi", period)
         personal_exemptions = tax_unit("oh_personal_exemptions", period)
         # Per tax form, amount can be negative
-        modified_agi = agi - personal_exemptions
-        amount_per_exemption = p.amount.calc(modified_agi, right=True)
+        modified_agi_less_exemptions = modified_agi - personal_exemptions
+        amount_per_exemption = p.amount.calc(modified_agi_less_exemptions, right=True)
 
         exemptions = tax_unit("exemptions_count", period)
 
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/deductions/business_income/oh_business_income_deduction.py b/policyengine_us/variables/gov/states/oh/tax/income/deductions/business_income/oh_business_income_deduction.py
new file mode 100644
index 00000000000..6504536a998
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/deductions/business_income/oh_business_income_deduction.py
@@ -0,0 +1,27 @@
+from policyengine_us.model_api import *
+
+
+class oh_business_income_deduction(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Ohio business income deduction"
+    documentation = "Ohio Schedule of Business Income, line 13."
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        # R.C. 5747.01(A)(28)
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.01",
+        "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf#page=5",
+    )
+    defined_for = StateCode.OH
+
+    def formula(tax_unit, period, parameters):
+        p = parameters(period).gov.states.oh.tax.income.deductions.business_income
+        # Line 11: the lesser of business income or federal adjusted gross
+        # income, but not less than zero.
+        business_income = tax_unit("oh_business_income", period)
+        federal_agi = tax_unit("adjusted_gross_income", period)
+        deductible = max_(min_(business_income, federal_agi), 0)
+        # Lines 12-13
+        filing_status = tax_unit("filing_status", period)
+        return min_(deductible, p.cap[filing_status])
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/deductions/business_income/oh_business_income_deduction_person.py b/policyengine_us/variables/gov/states/oh/tax/income/deductions/business_income/oh_business_income_deduction_person.py
new file mode 100644
index 00000000000..0fbdf5d11ec
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/deductions/business_income/oh_business_income_deduction_person.py
@@ -0,0 +1,30 @@
+from policyengine_us.model_api import *
+
+
+class oh_business_income_deduction_person(Variable):
+    value_type = float
+    entity = Person
+    label = "Ohio business income deduction for each filer"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        # R.C. 5747.01(A)(28): deducted "from the portion of an individual's
+        # federal adjusted gross income that is business income".
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.01",
+        "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf#page=5",
+    )
+    defined_for = StateCode.OH
+
+    def formula(person, period, parameters):
+        # The deduction comes out of each filer's business income. The statute
+        # caps the deduction per return and does not say how a joint cap is
+        # divided; as a modeling convention, it is shared in proportion to
+        # each filer's positive business income. The split matters only for
+        # each spouse's Ohio AGI (joint filing credit qualifying income).
+        deduction = person.tax_unit("oh_business_income_deduction", period)
+        business_income = max_(person("oh_business_income_person", period), 0)
+        total_business_income = person.tax_unit.sum(business_income)
+        share = np.zeros_like(total_business_income)
+        mask = total_business_income > 0
+        share[mask] = business_income[mask] / total_business_income[mask]
+        return deduction * share
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain.py b/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain.py
new file mode 100644
index 00000000000..316aac7f799
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain.py
@@ -0,0 +1,18 @@
+from policyengine_us.model_api import *
+
+
+class oh_qualifying_capital_gain(Variable):
+    value_type = float
+    entity = Person
+    label = "Ohio qualifying capital gain"
+    documentation = (
+        "Capital gain from the sale of an interest in an entity that meets "
+        "R.C. 5747.79(A)(1): the seller materially participated in the entity "
+        "or made a venture capital investment of at least one million dollars "
+        "in it, and the entity was organized and headquartered in Ohio for the "
+        "five years before the sale."
+    )
+    unit = USD
+    definition_period = YEAR
+    reference = "https://codes.ohio.gov/ohio-revised-code/section-5747.79"
+    defined_for = StateCode.OH
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain_deductible_payroll.py b/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain_deductible_payroll.py
new file mode 100644
index 00000000000..b07a96dd8f5
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain_deductible_payroll.py
@@ -0,0 +1,16 @@
+from policyengine_us.model_api import *
+
+
+class oh_qualifying_capital_gain_deductible_payroll(Variable):
+    value_type = float
+    entity = Person
+    label = "Ohio deductible payroll for the qualifying capital gain deduction"
+    documentation = (
+        "The qualifying payroll of the entity whose sale produced the "
+        "qualifying capital gain, multiplied by the percentage of the entity "
+        "the taxpayer sold (R.C. 5747.79(A)(3)-(4))."
+    )
+    unit = USD
+    definition_period = YEAR
+    reference = "https://codes.ohio.gov/ohio-revised-code/section-5747.79"
+    defined_for = StateCode.OH
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain_deduction.py b/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain_deduction.py
new file mode 100644
index 00000000000..c97dd054149
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/deductions/qualifying_capital_gain/oh_qualifying_capital_gain_deduction.py
@@ -0,0 +1,47 @@
+from policyengine_us.model_api import *
+
+
+class oh_qualifying_capital_gain_deduction(Variable):
+    value_type = float
+    entity = Person
+    label = "Ohio qualifying capital gain deduction"
+    documentation = (
+        "The lesser of the qualifying capital gain or the deductible payroll "
+        "(R.C. 5747.79(B)), computed for the sale of interests in one entity. "
+        "For sales in several entities, the deduction is the sum of the lesser "
+        "amount for each entity (R.C. 5747.79(C)(2)); set this variable "
+        "directly in that case."
+    )
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        # R.C. 5747.79(B); R.C. 5747.01(A)(34)
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.79",
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.01",
+    )
+    defined_for = StateCode.OH
+
+    def formula(person, period, parameters):
+        p = parameters(
+            period
+        ).gov.states.oh.tax.income.deductions.qualifying_capital_gain
+        if not p.in_effect:
+            return 0
+        # The lesser of the qualifying capital gain or the deductible payroll.
+        # The model counts capital gains as nonbusiness income, so none of
+        # this gain is also deducted as business income under (A)(28).
+        # A qualifying capital gain counts only "to the extent that such
+        # capital gain is not otherwise deducted or excluded in computing
+        # federal or Ohio adjusted gross income" (R.C. 5747.79(A)(1)); as a
+        # stand-in, it cannot exceed the capital gains reported.
+        gain = min_(
+            max_(person("oh_qualifying_capital_gain", period), 0),
+            max_(person("capital_gains", period), 0),
+        )
+        payroll = max_(
+            person("oh_qualifying_capital_gain_deductible_payroll", period), 0
+        )
+        # A dependent's gain is outside the filers' federal AGI; the
+        # deduction belongs on the dependent's own return (R.C. 5747.79(A)(1)).
+        not_dependent = ~person("is_tax_unit_dependent", period)
+        return where(not_dependent, min_(gain, payroll), 0)
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/exemptions/oh_personal_exemptions.py b/policyengine_us/variables/gov/states/oh/tax/income/exemptions/oh_personal_exemptions.py
index 26cd41315c5..e2e1fb95dd6 100644
--- a/policyengine_us/variables/gov/states/oh/tax/income/exemptions/oh_personal_exemptions.py
+++ b/policyengine_us/variables/gov/states/oh/tax/income/exemptions/oh_personal_exemptions.py
@@ -9,6 +9,7 @@ class oh_personal_exemptions(Variable):
     definition_period = YEAR
     reference = (
         "https://tax.ohio.gov/static/forms/ohio_individual/individual/2021/pit-it1040-booklet.pdf#page=14",
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.025",
     )
     defined_for = StateCode.OH
 
@@ -19,7 +20,8 @@ def formula(tax_unit, period, parameters):
             tax_unit, period, ["oh_personal_exemptions_eligible_person"]
         )
 
-        agi = tax_unit("oh_agi", period)
-        exemption_amount = p.amount.calc(agi)
+        # R.C. 5747.025(A) sets the exemption by modified adjusted gross income.
+        modified_agi = tax_unit("oh_modified_agi", period)
+        exemption_amount = p.amount.calc(modified_agi)
 
         return eligible_exemptions * exemption_amount
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/oh_income_tax_before_non_refundable_credits.py b/policyengine_us/variables/gov/states/oh/tax/income/oh_income_tax_before_non_refundable_credits.py
index 36cd6cb8d33..54f06107f70 100644
--- a/policyengine_us/variables/gov/states/oh/tax/income/oh_income_tax_before_non_refundable_credits.py
+++ b/policyengine_us/variables/gov/states/oh/tax/income/oh_income_tax_before_non_refundable_credits.py
@@ -11,7 +11,8 @@ class oh_income_tax_before_non_refundable_credits(Variable):
     reference = "https://tax.ohio.gov/static/forms/ohio_individual/individual/2021/pit-it1040-booklet.pdf"
 
     def formula(tax_unit, period, parameters):
-        taxable_income = tax_unit("oh_taxable_income", period)
+        # IT 1040 line 8a: tax on taxable nonbusiness income (line 7).
+        taxable_income = tax_unit("oh_taxable_nonbusiness_income", period)
         p = parameters(period).gov.states.oh.tax.income
         exempt = tax_unit("oh_income_tax_exempt", period)
         # The statute sets a base amount for each bracket. The marginal rates
@@ -19,4 +20,7 @@ def formula(tax_unit, period, parameters):
         # $100,000), which the base adjustment adds. "More than" the
         # threshold, so right=True keeps the threshold itself in the lower step.
         base_adjustment = p.base_adjustment.calc(taxable_income, right=True)
-        return (p.rates.calc(taxable_income) + base_adjustment) * ~exempt
+        nonbusiness_tax = (p.rates.calc(taxable_income) + base_adjustment) * ~exempt
+        # Line 8b: tax on taxable business income; line 8c is the sum.
+        business_tax = tax_unit("oh_business_income_tax", period)
+        return nonbusiness_tax + business_tax
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/oh_income_tax_exempt.py b/policyengine_us/variables/gov/states/oh/tax/income/oh_income_tax_exempt.py
index 8b2972926b7..675f23e6c4f 100644
--- a/policyengine_us/variables/gov/states/oh/tax/income/oh_income_tax_exempt.py
+++ b/policyengine_us/variables/gov/states/oh/tax/income/oh_income_tax_exempt.py
@@ -8,11 +8,14 @@ class oh_income_tax_exempt(Variable):
     defined_for = StateCode.OH
     unit = USD
     definition_period = YEAR
-    reference = "https://tax.ohio.gov/static/forms/ohio_individual/individual/2021/pit-it1040-booklet.pdf"
+    reference = (
+        "https://tax.ohio.gov/static/forms/ohio_individual/individual/2021/pit-it1040-booklet.pdf",
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.02",
+    )
 
     def formula(tax_unit, period, parameters):
-        taxable_income = tax_unit("oh_taxable_income", period)
+        # ORC 5747.02(A)(3): no tax on income other than taxable business
+        # income if that balance is "equal to or less than" the threshold.
+        taxable_nonbusiness_income = tax_unit("oh_taxable_nonbusiness_income", period)
         p = parameters(period).gov.states.oh.tax.income
-        # ORC 5747.02(A)(3): no tax if the balance is "equal to or less than"
-        # the threshold.
-        return taxable_income <= p.agi_threshold
+        return taxable_nonbusiness_income <= p.agi_threshold
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/oh_modified_agi.py b/policyengine_us/variables/gov/states/oh/tax/income/oh_modified_agi.py
index 1132ac719f0..3fe292c90b6 100644
--- a/policyengine_us/variables/gov/states/oh/tax/income/oh_modified_agi.py
+++ b/policyengine_us/variables/gov/states/oh/tax/income/oh_modified_agi.py
@@ -8,11 +8,17 @@ class oh_modified_agi(Variable):
     unit = USD
     definition_period = YEAR
     reference = (
+        # R.C. 5747.01(II): "Ohio adjusted gross income plus any amount
+        # deducted under divisions (A)(28) and (34) of this section".
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.01",
         "https://tax.ohio.gov/static/forms/ohio_individual/individual/2022/it1040-sd100-instruction-booklet.pdf#page=31",
+        # 2024 Ohio IT 1040 instructions, MAGI worksheet
+        "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/it1040-booklet.pdf#page=40",
     )
     defined_for = StateCode.OH
 
-    adds = ["oh_agi"]
-
-
-# Additionally adds the Ohio Business income deduction
+    adds = [
+        "oh_agi",
+        "oh_business_income_deduction",
+        "oh_qualifying_capital_gain_deduction",
+    ]
diff --git a/policyengine_us/variables/gov/states/oh/tax/income/oh_taxable_nonbusiness_income.py b/policyengine_us/variables/gov/states/oh/tax/income/oh_taxable_nonbusiness_income.py
new file mode 100644
index 00000000000..660fcf1b667
--- /dev/null
+++ b/policyengine_us/variables/gov/states/oh/tax/income/oh_taxable_nonbusiness_income.py
@@ -0,0 +1,22 @@
+from policyengine_us.model_api import *
+
+
+class oh_taxable_nonbusiness_income(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Ohio taxable nonbusiness income"
+    documentation = "Ohio IT 1040, line 7."
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        # R.C. 5747.02(A)(3)
+        "https://codes.ohio.gov/ohio-revised-code/section-5747.02",
+        "https://dam.assets.ohio.gov/image/upload/tax.ohio.gov/forms/ohio_individual/individual/2024/1040-bundle-original-fi.pdf#page=1",
+    )
+    defined_for = StateCode.OH
+
+    def formula(tax_unit, period, parameters):
+        # Line 5 minus line 6, not less than zero.
+        income_tax_base = tax_unit("oh_taxable_income", period)
+        taxable_business_income = tax_unit("oh_taxable_business_income", period)
+        return max_(income_tax_base - taxable_business_income, 0)