You've probably heard the rumors that Ohio is trying to get rid of its income tax entirely. It's a big goal. Honestly, if you look at the legislative moves made by Governor Mike DeWine and the General Assembly over the last couple of years, they aren't exactly hiding their hand. They want people to move to the Buckeye State, and they're using a shrinking tax bill as the primary bait.
But here’s the thing. Taxes are never actually simple.
If you're living in Columbus, Cleveland, or even a tiny township like Yellow Springs, your total bill isn't just that one number you see on the state form. Ohio has a "layered" system. You've got the state level, then you've got the municipal level, and sometimes even school district taxes. It adds up. Understanding the income tax rate Ohio requires looking at the whole puzzle, not just the pieces the politicians talk about on the news.
The New Reality of the Ohio Income Tax Rate
For the 2024 tax year and moving into 2025, Ohio has drastically simplified its bracket system. Remember when we had five or six different tiers? That’s gone. It was messy, confusing, and frankly, a headache for everyone involved.
Now, the state has basically consolidated everything into just two main taxable brackets for individuals. If you earn $26,050 or less, you owe $0 in state income tax. That’s a huge win for lower-income earners and students. If you earn more than $26,050 but less than $100,000, you're looking at a rate of 2.75%. For those making over $100,000, the rate is 3.5%.
It’s a flat-ish system.
The goal, according to the Ohio Department of Taxation, was to make the state more competitive with neighbors like Indiana or Michigan. By slashing the top rates—which used to be well over 4%—the state is betting that more high earners will stick around.
What happened to the old brackets?
They were phased out. In 2023, we saw the beginning of this transition. The state began merging the tiers to reduce the "tax drag" on middle-class families. If you’re looking at older tax forms from 2021 or 2022, toss them out. They’re irrelevant now. The current income tax rate Ohio residents pay is significantly lower than it was five years ago.
Why Your City Tax Might Be Higher Than the State Tax
Here is the part that catches newcomers off guard. You might be celebrating that 2.75% state rate, but then you realize your city takes 2.5% on top of it.
Ohio is unique. It has one of the most robust municipal income tax systems in the country. Almost every major city and many small villages levy their own tax on earned income. For instance, if you work in the City of Columbus, you’re paying a 2.5% municipal tax. In Euclid, it’s 2.85%. Some places are lower, like 1% or 1.5%, but you can't ignore them.
It gets weirder with "tax credits."
If you live in one city but work in another, you might get a credit from your home city for the taxes you paid to the city where your office is located. But it’s rarely a 100% credit. You might end up paying a "gap" percentage to your home town. This is where most people get tripped up. They assume their employer handled everything, but then they get a letter from the Regional Income Tax Agency (RITA) or the Central Collection Agency (CCA) saying they owe three years of back taxes plus interest.
Don't let that be you.
School District Income Taxes: The Third Layer
As if state and city taxes weren't enough, some Ohioans live in "taxing school districts." Not every district does this. In fact, most don't. But about 200 school districts in Ohio have a special income tax to fund their operations.
These rates are usually small—0.25% to 1.5%—but they are separate from your state and city filings. They use a specific four-digit code. If you live in a district like Pickerington or Upper Arlington, you need to check if that extra line item applies to you.
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It’s often based on your residence, not where you work.
Business Owners and the Business Income Deduction (BID)
If you own a small business or work as a freelancer (1091-NEC life), Ohio is actually a bit of a paradise. There is something called the Business Income Deduction.
Basically, the first $250,000 of business income is 100% deductible for most taxpayers filing as individuals or couples. Anything over that $250,000 is taxed at a flat 3%. This is a massive incentive. It’s one of the reasons why the income tax rate Ohio offers is so attractive to entrepreneurs compared to somewhere like New York or California.
You still pay federal self-employment tax, of course. Uncle Sam always gets his cut. But at the state level, Ohio gives business owners a huge break.
The Fine Print on the BID
You can't just call any income "business income." It has to be from a pass-through entity like an LLC, S-Corp, or Sole Proprietorship. If you’re a C-Corp, this doesn’t apply to you in the same way. Also, you have to be careful with how you report it on your Ohio Schedule IT BUS.
Common Misconceptions About Ohio Taxes
People think Ohio is a high-tax state because of the local taxes. While it’s true that the total burden can be higher than a state with no income tax like Florida, the cost of living usually balances it out.
Another myth? That retirees get crushed.
Actually, Ohio is pretty friendly to seniors. Social Security benefits are not taxed at the state level. There are also credits for retirement income and for people aged 65 or older. If you're planning to spend your golden years in Cincinnati or the Hocking Hills, the tax man won't be as scary as you might think.
The RITA Factor
If you live in Ohio, you will eventually hear the name RITA. The Regional Income Tax Agency handles collections for hundreds of municipalities. Their website looks like it’s from 1998, but they are efficient. If you move, notify them immediately. If you change jobs, check your local withholding.
Most tax software like TurboTax or H&R Block handles RITA filings now, but it’s always worth a double-check.
How to Lower Your Ohio Tax Liability
Even with lower rates, nobody wants to pay more than they have to. Ohio offers several "above-the-line" deductions that can shrink your taxable income before you even start calculating the rate.
- Ohio 529 Plans: You can deduct up to $4,000 per beneficiary per year for contributions to Ohio’s 529 College Savings Program.
- STABLE Accounts: If you're contributing to an account for someone with a disability, there are deductions there too.
- Health Savings Accounts (HSAs): These usually flow through from your federal return, but they effectively lower your Ohio tax base as well.
Actionable Steps for Tax Season
Stop waiting until April 14th. The complexity of the municipal system means you need time to track down local forms.
- Verify your school district code. Go to the Ohio Department of Taxation website and use the "The Finder" tool. Enter your address. It will tell you exactly which school district you live in and if they have a tax.
- Check your pay stubs. Ensure your employer is withholding for the city where you work. If you work from home, ensure they are withholding for the city where you live. Remote work has made this a nightmare for payroll departments.
- File the IT BUS if you’re a freelancer. Don't miss out on that $250,000 deduction. It’s the single biggest tax break available in the state.
- Look for local credits. If you paid tax to City A but live in City B, check City B's website to see how much of a credit they allow.
Ohio is moving toward a flatter, simpler state tax, but the local layers keep things interesting. Keep an eye on the statehouse; there is a lot of talk about moving to a single flat rate or even a 0% rate by the end of the decade. For now, enjoy the 2.75% and 3.5% brackets—they’re a lot better than what we had just a few years ago.
Be thorough with your local filings, and you’ll avoid the dreaded "certified mail" from your city tax office. That's the real goal.