With Lake Erie to the north and the Ohio River to the south, the State of Ohio acts as a link between the Northeast and the Midwestern regions of America. Called The Buckeye State (for a tree that produces nuts that look like deer eyes) and The Mother of Presidents (for being the birthplace of seven U.S. presidents), Ohio is also the seventh most populated state in the country.
Ohio seems to have it all: several major cities, mighty factories, rolling fields and plains, and a system of well-developed highways. It is home to The Rock and Roll Hall of Fame, The Pro Football Hall of Fame, and Cedar Point. But in January 2009, it also had an unemployment rate of 8.8% (1.2% above the national average).
The following article provides information about Ohio’s tax system, including personal income taxes, notable changes in tax policy, and guidelines on filing your taxes. In addition to knowing a good candy buckeye recipe and the dates for deer season, Ohioans should also stay informed about their taxes, especially in the light of recent tax reforms and changes.
TABLE OF CONTENTS
General Information About Ohio Tax Laws
- • Individual Income Tax
- • Sales and Use Tax
- • Corporate Tax
- • Property Tax
- • Other Taxes
Notable Changes In Policy/Legislation
Information About Filing Your Ohio Taxes
Tax Tips & Helpful Facts
GENERAL INFORMATION ABOUT OHIO TAX LAWS
There are three different types of Individual Income Tax imposed in Ohio. Other major taxes include the Sales and Use Tax, Corporate Tax, and Property 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 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 three 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.)
To receive credit for income earned while residing in another state, part-year residents and nonresidents should report income not earned in Ohio on Line 63 of Form IT-1040. They should also include Form IT-2023 (Income Allocation and Apportionment Nonresident Credit and Part-Year Resident Credit):
Ohio-sourced income includes the following:
- • Wages earned in Ohio
- • Income or gain from Ohio property
- • Income or gain from a sole proprietorship doing business in Ohio
- • Income or gain from a pass-through entity doing business in Ohio
- • Ohio Lottery winnings
Ohio’s State Income Tax is progressive, which means that an individual’s tax rate rises with his or her income. There are 9 different brackets for individual 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
The above rates apply to taxable years beginning in 2009. There are no standard deductions, although personal exemptions ($1,450 for individuals and $1,450 for dependents) are allowed.
Additionally, children who have been claimed as “dependents” on their parents’ Ohio Income Tax returns can also claim themselves on their own tax return.
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). For more information, see the “Estimated Payments” section of the Department’s website:
The Ohio Benefit Bank (OBB) is a web program that helps moderate- and low-income taxpayers. It offers access to tax credits and public benefits, as well as free assistance in filing returns. More information about this computer program can be found at the following website:
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 subject to this 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). Revenue from this tax goes mainly to a municipality’s general fund.
Find your municipality’s income tax rate by using the following online tool:
Forms and other municipal tax information are provided by the municipalities. For an index of municipalities with links to their websites, visit the Ohio Department of Taxation at: www.tax.ohio.gov/divisions/municipalities
Personal exemptions are not permitted. However, the State does require the exemption of military pay, interest and dividends, capital gains and losses, pensions and disability benefits, public utilities subject to the public utilities excise tax, and income from tax-exempt activities of religious, educational, or charitable institutions. Credit may also be available to those who pay additional Municipal Income Tax in a municipality where they are employed.
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. In 2007, this tax was enforced by 164 out of 614 districts and collected about $287.5 million in total revenue.
The School District Income Tax is regulated by the Ohio Department of Taxation, which collects it in three ways:
- • Employer withholding
- • Individual quarterly estimated payments
- • Annual returns
Annual returns are due between January 1st and April 15th. Quarterly estimated returns are due by April 15th, June 15th, September 15th, and January 15th, for calendar year taxpayers.
This tax does not allow for exemptions, although senior citizens may receive a credit of $50 toward any School District Income Tax they owe.
Rates for this tax range from 0.5% to 2%, in multiples of 0.25%. Find your school district’s income tax rate by using the following online tool:
Taxpayers may file their School District Income Tax return online or by paper. To file online, visit the Online Services center at:
For a printable version of Form SD-100 (School District Income Tax Return), follow this link:
For instructions on this return, visit the following webpage:
For additional information about this tax, including publications and FAQs, visit the School District Income Tax section of the Department of Revenue website:
Sales and Use Tax
The Sales and 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 a Use Tax Return with Form UUT-1. This helps ensure fair competition with out-of-state businesses and protects the State of Ohio from lost revenue.
There are three levels at which Sales and Use Tax can be imposed:
- • State
- • County
- • Regional Transit Authority
The state Sales and Use Tax rate is 5.5% and the revenue collected goes to the State’s General Fund. Counties may impose a rate of up to 1%, plus an additional rate of up to 0.5% for county general revenue and other specific purposes. Regional Transit Authorities may impose rates that are between 0.25% and 1.5% (in increments of 0.25%). The total combined Sales and Use Tax, with the highest allowed rates for each locality, may equal up to 8.5%.
Search for local Sales and Use Tax rates by using the following online tool:
Vendors are now required to file their sales tax returns electronically by using one of the Department’s approved methods. To file, vendors should go to the following website:
The Streamlined Sales Tax Project (SSTP) is a multi-state initiative that was adopted by Ohio in 2005. It’s 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. The Ohio Department of Revenue offers information about this project at the following website:
You can also visit the official SSTP website:
