Ohio State Tax ― Individual Income Tax
Ohio has one of the most complex income tax systems in the country. In addition to the state income tax, municipalities and school districts may impose their own income taxes.
State Income Tax
The “state income tax” applies to all Ohio residents and part-year residents, as well as all nonresidents who earn Ohio-sourced income. Taxpayers must file Form IT-1040 (Individual Income Tax Return) or Form IT-1040EZ (Individual Income Tax Return for Full-Year Ohio Residents) with the Ohio Department of Taxation. Income tax returns are due on or before April 15th, and penalties and fees are enforced for any late filing.
Residency is defined according to the following 3 categories:
- Resident ― a person who has lived in Ohio the entire year and is considered a resident even if he or she was temporarily away
- Part-year Resident ― a person who moved into or out of Ohio during the tax year
- Nonresident ― a person who has lived outside Ohio the entire year (Exception: a full-year nonresident who lives in a state that borders Ohio does not have to file an Ohio return, as long as their only Ohio-sourced income is from wages earned from a non-family member employer)
Ohio’s state income tax is considered “progressive,” which means that an individual’s tax rate rises with their income. There are 9 different brackets for state income tax rates:
- 0.587% on the first $5,000 of taxable income
- 1.174% plus $29.35 on taxable income between $5,001 and $10,000
- 2.348% plus $88.05 on taxable income between $10,001 and $15,000
- 2.935% plus $205.45 on taxable income between $15,001 and $20,000
- 3.521% plus $352.20 on taxable income between $20,001 and $40,000
- 4.109% plus $1,056.40 on taxable income between $40,001 and $80,000
- 4.695% plus $2,700.00 on taxable income between $80,001 and 100,000
- 5.451% plus $3,639.00 on taxable income between $100,000 and $200,000
- 5.925% plus $9,090.00 on taxable income $200,001 or more
Estimated Tax Payments must be made if an individual’s tax is expected to exceed $500, after subtracting estimated withholding and credits. This can be done electronically or by paper, with Form IT-1040ES (Individual Estimated Income Tax).
Municipal Income Tax
The “municipal income tax” applies to most taxpayers. It is withheld from an individual’s wages by an employer, which sends monthly payments to the municipality. It also applies to businesses that earn net profits within a municipality. Taxpayers whose income has not been withheld are required to file quarterly declarations.
Income that is subject to municipal income tax includes the following:
- Wages, salaries, and other compensation earned by inhabitants of a municipality and by nonresidents working within a municipality
- Net profits of companies that conduct business within a municipality
- Net profits from rental activity
Municipal tax rates are established locally. They must have a flat rate, which cannot exceed 1% (unless a higher rate is supported by voter approval). Municipal income tax rates can be found online at the OH Department of Taxation website: thefinder.tax.ohio.gov/StreamlineSalesTaxWeb/municipal
School District Income Tax
In 1981, the Ohio General Assembly authorized Ohio school districts to levy income taxes. In most cases, this tax is imposed on the income of residents and estates of persons that were located in a school district at their time of death. In other cases, it is imposed only on wages and self-employment income (known as the “earned income only” version). Revenue from this tax is specifically intended to fund school districts.
The school district income tax is regulated by the Ohio Department of Taxation, which collects it in 3 ways:
- Employer withholding
- Individual quarterly estimated payments
- Annual returns
Rates for this tax range from 0.5% to 2%, in multiples of 0.25%. School district income tax rates can be found online at the OH Department of Taxation website: thefinder.tax.ohio.gov/StreamlineSalesTaxWeb/schooldistrict
In order to file for an Ohio tax extension, you need to qualify for a federal tax extension first. There is no special Ohio extension form. Instead, you must attach one of the following to your Ohio income tax return:
- A copy of your federal extension
- Your federal extension confirmation number
- A printed copy of the federal acknowledgment for an extension
Tax extension payments are still due by April 15th and can be made using Form IT-40P (Income Tax Payment Voucher).
Ohio State Tax ― Corporate Tax
The “Corporation Franchise Tax” is a privilege tax on corporations conducting business in Ohio. It is imposed on a corporation if the following apply:
- The corporation is organized for profit
- The corporation owns capital or property in Ohio
- The corporation has nexus with Ohio
- The corporation holds a charter/certificate of compliance authorizing business in Ohio
For most corporations, tax is imposed on net worth or net income. Both must be computed, and the corporation then pays whichever rate results in a higher tax. (A corporation may be subject to a minimum tax instead, if that results in a higher tax.) The tax rates are as follows:
- Tax on Net Worth: 4 mills (1 mill is equal to one-tenth of a cent), with a maximum tax of $150,000
- Tax on Net Income: 5.1% on the first $50,000 and 8.5% on remaining net income
- Minimum Tax: $50 for small companies and $1,000 for large companies
Financial institutions have a different tax rate (of 13 mills) that is based only on net worth.
There is also a Tier I Litter Tax that applies to all corporations except financial institutions and family farm corporations. The rates are 0.14 mills of net worth or 0.11% of net income, whichever produces the highest amount of tax. The maximum tax that can be charged is $5,000.
The Commercial Activity Tax (CAT), also known as a gross receipts tax (GRT), is currently being phased in to replace the Corporate Franchise Tax. The franchise tax is being reduced in 20% increments from 2006 to 2010. The CAT applies to most corporations, with the exception of financial institutions, securitization companies, and affiliates of insurance companies. As of April 1, 2009, this tax reached its final phase with a base rate of 0.26% on a corporation’s gross receipts.
Ohio State Tax ― Sales & Use Tax
The sales/use tax applies to the retail sale, use, consumption, lease, rental, and storage of personal tangible property and certain services. It is collected mainly by vendors, who must make regular reports and payments to the Ohio Department of Revenue. If tax was not sufficiently collected, it is a personal responsibility of the consumer to file Form UUT-1 (Universal Use Tax Return). This helps ensure fair competition with out-of-state businesses and protects the State of Ohio from lost revenue.
There are 3 levels at which sales/use tax can be imposed:
- State ― the state sales/use tax rate is 5.5% and the revenue collected goes to the State’s General Fund
- County ― counties may impose a tax rate of up to 1%, plus an additional rate of up to 0.5% for county general revenue and other purposes
- Regional Transit Authority ― Regional Transit Authorities may impose tax rates that are between 0.25% and 1.5% (in increments of 0.25%)
The Streamlined Sales Tax Project (SSTP) is a multi-state initiative that was adopted by Ohio in 2005. Its mission is to make sales tax laws and systems more consistent among participating states. It also allows vendors to collect state sales tax more easily.
Ohio State Tax ― Property Tax
Real Property Tax has been enforced in Ohio since 1825. It applies to all real property owners, including individuals and businesses. Certain organizations are exempt, such as governments, schools, churches, charities, and municipal corporations.
“Real property” is defined as land and buildings (as opposed to “personal property” which includes equipment, furniture, and other inventory). There are 2 classes of real property:
- Class I includes residential and agricultural property
- Class II includes all other real property
The tax base for real property is 35% of the true market value of assessed land and improvements. This does not apply to certain land designated entirely for agricultural use. Rates are decided and imposed on the local level by taxing jurisdictions (counties, municipalities, townships, school districts, and special service districts). Depending on its location, a property may be subject to more than one taxing district.
Every 6 years, auditors are required to reappraise real property so values can be updated. The assessments are then evaluated by the Division of Tax Equalization, and county treasurers prepare the tax bills. Appeals and complaints regarding assessments of real property are overseen by county boards. Real property tax is supervised by the state Tax Commissioner, who is also in charge of ensuring taxation uniformity across jurisdictions.
In general, at least one-half of the property tax bill is due by January 31st, and the remaining balance is due by June 20th. The tax is collected by county treasurers and distributed among taxing districts according to their rates and taxable values.
Property Tax Relief
There are 3 tax exemptions that apply to Ohio property tax. School districts are reimbursed by the Department of Education for these exemptions, and other jurisdictions are reimbursed by the Tax Commissioner:
- 10% Rollback ― This is a partial exemption that requires county auditors to reduce charged taxes by 10%. It applies to non-business property, such as residential and agricultural property.
- 2.5% Rollback ― This is a further reduction of tax that applies to owner-occupied dwellings, which includes a house/building and up to one acre of land.
- Homestead Exemption ― This exemption is designed for senior citizens and certain homeowners with disabilities. For those who qualify, it offers a credit that is equal to a tax of up to $25,000 of a property’s market value.
Ohio State Tax Forms
Form IT-1040 (Individual Income Tax Return)
Form IT-1040EZ (Individual Income Tax Return for Full-Year Ohio Residents)
Form IT-1040ES (Individual Estimated Income Tax)
Form SD-100 (School District Income Tax Return)
Form IT-2023 (Income Allocation and Apportionment Nonresident Credit and Part-Year Resident Credit)
Form IT-40P (Income Tax Payment Voucher)
Form IT-1040X (Amended Individual Income Tax Return):
Form UUT-1 (Universal Use Tax Return)
Ohio State Tax Resources
Ohio Department of Taxation: www.tax.ohio.gov
Ohio Income Tax Booklet (for residents, nonresidents and part-year residents): tax.ohio.gov/documents/forms/individual/IT1040_Instructions
OH Department of Taxation “Online Services” Income Taxes center: www.tax.state.oh.us/PROD/IFileWeb
“Ohio eForms” Income Tax – use your computer to fill out your return electronically: tax.ohio.gov/online_services/ohio_eforms
Ohio’s Tax Form Library: tax.ohio.gov/forms
For information about Ohio’s property tax, including tax rates and a directory of county auditors, the OH Department of Taxation “Real Property Tax” website: www.tax.ohio.gov/divisions/real_property
Check the status of your Ohio state tax refund online: www.tax.state.oh.us/PROD/WheresMyRefundWeb
If you suspect tax fraud, you may alert Ohio officials by email or paper mail: tax.ohio.gov/channels/global/suspected_tax_fraud
The City of Columbus (OH) Income Tax Division: www.columbustax.net
Ohio’s Tax Freedom Day is April 11th.