Ohio Tax Guide 2024: Income Tax, Sales Tax, Property Taxes, and More

Ohio Tax Guide

Before moving to Ohio, learning about the state's tax laws will help you settle into your new home as fast as possible. Ohio offers a unique blend of opportunities for both individuals and businesses, making it an attractive destination for newcomers. However, navigating the tax landscape is essential in making an informed decision about your relocation. It may sound complicated, but grasping a few key tax facts ensures an easy transition to the Buckeye State.

Ohio's tax system encompasses several key areas that potential residents should be aware of, including income tax, sales tax, property tax, and other local taxes that vary by jurisdiction. Understanding these components will help you budget effectively and allow you to take advantage of any tax benefits and exemptions that may make it easier to buy your new home and move to Ohio. 

Ohio Income Tax

State income tax is a must-know topic for every Ohio resident. The tax obligation varies depending on annual income, with distinctions made between residents, part-year residents, and nonresidents.

Who Pays Income Tax in Ohio?

It doesn't matter whether you're living in one of Ohio's best small towns or thriving big cities: all residents making more than $26,050 are responsible for paying state income taxes. However, residents of certain reciprocal states are granted exemptions. This includes people living in Indiana, Kentucky, West Virginia, Michigan, and Pennsylvania who earn wages in Ohio. These exempt individuals will still be responsible for taxes levied in their state of residence. 

The tax obligation is not limited to individuals alone; businesses within the state are also subject to corporate taxes on gross receipts over $3 million as per Ohio's Commercial Activity Act. The Ohio Department of Taxation oversees the administration and collection of these taxes.

Resident vs. Part-year Resident vs. Nonresident Status

Understanding the differences between resident, part-year resident, and nonresident status is crucial for accurate Ohio income tax filing, as each category holds distinct tax obligations. Generally speaking, a resident is considered to be anyone with a fixed home in the state (either rented or owned) and must pay tax on all income. If a resident earns taxed income outside of Ohio, they can have their burden appropriately adjusted. However, if a resident earns money in a non-taxing state, those earnings will still be taxed in Ohio. Out-of-state income is not reported on the standard form. Instead, part of their adjusted gross income will be used to account for their out-of-state income. 

Conversely, nonresidents are taxed only on income earned within the state (unless they're residents of the aforementioned reciprocal states). For part-year residents, the tax is applied proportionately based on the period of residency in Ohio. Additionally, nonresidents earning from Ohio sources, like business profits or wages, are required to file Ohio income tax. Understanding these distinctions is vital for accurate and legal tax filing in the state of Ohio.

Ohio Income Tax Brackets

Ohio's income tax structure operates on a progressive scale, with tax rates ranging from 0.000% to 3.75%, depending on an individual's earnings. The State has a series of tax brackets corresponding to different income tax rates. The specific rate applied depends on a taxpayer's adjusted gross income (AGI).

For example, an individual with an AGI of up to $26,050 is exempt from state income tax. Those earning up to $100,000 are charged a 2.75% rate, while those with an AGI up to $115,300 pay 3.688%. For individuals earning over $115,300, the tax rate climbs to 3.75%.

Ohio Sales Tax

What is Ohio's Sales Tax?

Imposed on most retail purchases, Ohio's statewide sales tax rate stands at 5.75%, with additional county taxes potentially elevating this rate by up to 2.25%. This means that depending on the county, consumers could end up paying an effective sales tax rate of up to 8%. Ohio's sales tax is collected at the point of purchase and is then used to fund various state and local services.

The state sales tax is consistent across Ohio, but the additional county taxes can vary. Each of the 88 Ohio counties has the prerogative to levy an additional sales tax, ranging from 0% to 2.25%. This variability allows counties to respond to their unique funding needs while giving them fiscal autonomy. Despite the broad application of the sales tax, certain items in Ohio are exempt to ensure the affordability of essential goods. These exempt items include groceries, prescription drugs, diapers, and menstrual sanitary products. 

The revenue from the sales tax is a vital part of Ohio's state and local tax collections. It plays a significant role in funding government operations, programs, and services. This includes state education, healthcare, transportation, and public safety contributions. Thus, while the sales tax may seem like just another charge on your receipt, it is a crucial component of Ohio's tax structure, directly impacting the quality of public services.

Average Property Taxes in Ohio

Property taxes in Ohio vary significantly across different cities, reflecting differences in property values and local tax policies. Before going through the homebuying journey in Ohio, it's vital to investigate property tax rates in the different communities you're considering. Furthermore, the state of Ohio provides certain exemptions that can reduce the overall property tax burden for qualifying individuals.

Ohio Cities With Low Property Taxes

Middle Bass Island, a part of the Put-in-Bay township, boasted Ohio's lowest property tax rate in 2023, charging residents an annual tax of $810 for every $100,000 of home valuation. Kelleys Island was second-lowest with a $891 rate, while a section of Hamilton Township in Lawrence County featured a $916 rate. Lawrence County emerged as a notable region for low taxes, hosting 12 out of the top 20 locations with the lowest taxes. Other Ohio counties with low tax locales included Monroe, Noble, Erie, and Ottawa.

Ohio Cities With High Property Taxes

Analyzing the landscape of property taxes in Ohio reveals a significant variation, with certain areas, such as the Shaker Square neighborhood in Cleveland and the city of Shaker Heights, and specific regions within the Cleveland Heights-University Heights school district consistently witnessing high rates. Shaker Square, for instance, faces a rate of $3,989 per $100,000 property value, and Shaker Heights follows close behind with a rate of $3,904. Due to their higher population rates, these communities in and around the city of Cleveland experience higher property tax rates than more rural areas or less populous areas.

Ohio Property Tax Exemptions

While Ohio homeowners in certain regions may face significant property tax expenditures, the state offers several exemptions to help alleviate the tax burden for eligible individuals.

The Ohio Homestead Exemption provides substantial property tax relief by reducing the home's appraised value up to $25,000 for tax purposes. This exemption is designed to assist retirees remain in their homes by lessening their property tax obligations. To qualify, homeowners must meet specific age and income requirements.

Additionally, the Disabled Veterans Enhanced Homestead Exemption offers further relief, exempting the first $50,000 of a home's value from taxation for veterans with a 100% disability rating. These exemptions provide significant aid to those who need it most.

Other Taxes in Ohio

What Are Other Taxes in Ohio?

In Ohio, residents encounter other forms of taxation beyond the conventional income, sales, and property taxes. Taxes on gasoline purchases, alcohol, and tobacco products contribute to the state's revenue. Additionally, while the state abolished its estate tax in 2013, it's important to understand potential obligations for estates of individuals who passed away prior to this date.

Tax on Gas in Ohio

Among the various taxes imposed by Ohio, a significant one is the gas tax, levied on both regular and diesel fuels, with the revenue primarily dedicated to transportation infrastructure projects and maintenance.

Gas tax rates in Ohio vary depending on the type of fuel. These rates are subject to change, significantly impacting fuel costs for consumers. While it plays a part in the cost of living in Ohio, the revenue from this tax plays a vital role in the state's budget, funding necessary transportation infrastructure improvements and maintenance.

These rates are determined by state legislation and can be adjusted according to the state's budgetary needs. Therefore, understanding the structure of Ohio's gas tax is essential for individuals and businesses to anticipate fuel costs and budget accordingly.

Alcohol & Tobacco

Beyond income, sales, and property taxes, Ohio residents also face specific tax rates on alcohol and tobacco. These taxes not only contribute to state revenue but also help regulate consumption. The excise taxes vary depending on the product.

For example, beer is taxed at $0.18 per gallon. Wine with less than 14% alcohol is taxed at $.32 per gallon, while wine with 14% to 21% alcohol is taxed at $1 per gallon. Sparkling wines and champagnes receive a tax of $1.50 per gallon. 

Ohio's tobacco taxes include a $1.60 charge per pack of cigarettes and a 17% tax on the wholesale price for other tobacco products. These alcohol and tobacco taxes play a significant role in consumption regulation within the state.

Does Ohio Have Estate Tax?

Ohio has not imposed a state estate tax since repealing it in 2013. Eliminating the estate tax simplified estate planning procedures for Ohio residents, removing the necessity to factor in state estate or inheritance taxes. Moreover, this move reduced tax burdens on heirs, who are now exempt from these supplementary state taxes. Therefore, when considering Ohio state tax obligations, it is essential to note that neither estate nor inheritance tax applies, which differentiates Ohio from many other states.

Stay on Top of Your Taxes in Ohio

Understanding Ohio state taxes is crucial for residents as it aids in fulfilling their financial obligations to the state and contributes to developing essential public services. The state's online platform simplifies this process by providing easy access to information and resources. An informed taxpayer can make timely payments, track obligations, and utilize Ohio's tax structure more effectively. By staying on top of essential tax information, you don't have to worry about untimely surprises and can enjoy more time in the great state of Ohio.

Ready to start looking for your new home in Ohio? Call The Young Team at (216) 402-4774 today to get in touch with a local real estate expert who can help you start your homebuying journey.

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