In the Buckeye State, your residency status, income, and the school district you live in play a role in determining your filing requirements. Read this article for an overview of tax filing in Ohio, and answers to some frequently asked questions.
Filing Requirements
If you’ve lived in Ohio for the entire year, a part of the year, or have earned income sourced in Ohio, you will be required to file an Ohio state return. Generally, you’ll need to file an Ohio IT 1040 if your federal adjusted gross income exceeds $28,450. You may not be required to file if:
- Your Ohio AGI is less than or equal to $0.
- Your Senior Citizen Credit, Lump-Sum Distribution Credit, and Joint Filing Credit are equal to or exceed your income tax liability, AND you are not liable for school district income tax.
- Your exemption amount is the same or more than your Ohio AGI, AND you have no state income adjustments.
- You are a nonresident military service member whose only income is military pay.
Even if you don’t expect to owe state taxes, the Ohio Department of Taxation recommends filing to be certain that you have met all state filing requirements.
Get more information on Ohio filing requirements here.
What is the Ohio tax rate?
In Ohio, the income tax rate varies depending on how much you earn. House Bill 110 adjusted tax brackets so that taxpayers with $26,050 or less of non-business income are not subject to income tax.
Individual income over $26,050 is taxed at increasing rates from 2.765% to 3.999%.
You can review the current and prior year tax rates and income thresholds on the Ohio Department of Taxation website.
Which states have reciprocity agreements with Ohio?
Reciprocity agreements aim to make tax filing easier because you won’t have to file income taxes in the state where you work. Reciprocal agreements occur between two or more states, and they allow residents who work in a state other than their state of residence to pay income taxes in their home state only. Ohio’s reciprocity agreements extend to Indiana, Kentucky, Michigan, Pennsylvania, and West Virginia.
For example, if you live in Ohio and work in a reciprocal state, you will not have taxes withheld from the state where you work, and all your income will be taxed to Ohio. Meaning you’ll only be required to file an Ohio tax return.
If you work in a state without a reciprocal agreement, then you may need to file two state returns. You can file a non-resident return to report income when you live in one state and work in another.
Learn more: How to File Taxes in States with Reciprocity
What is the Ohio school district income tax?
The Ohio school district income tax is a unique component of the state’s tax system. It allows school districts to collect an additional income tax on residents and businesses within their communities to support local schools. School district income taxes adhere to the same filing, amending, payment, extension, and refund requirements and procedures as Ohio’s individual income tax return.
School district tax rates may vary by district, so your tax may differ from someone living in another area. Use the Ohio school district finder to search for your school district’s tax rate.
You can set up tax withholding for the Ohio school district income tax in the same way you would for state taxes by submitting Form IT-4 to your employer. At the end of the year, your employer will report the total amount of school district withholdings on your W-2.
How much is the Ohio Business Income deduction?
The Ohio Business Income Deduction (BID) is a tax benefit that provides relief to business owners and self-employed individuals in the state. The BID allows qualifying Ohio businesses to deduct a portion of their business income from their taxable income, which can significantly reduce their tax liability.
For the 2022 tax year, business owners could deduct up to $250,000 of their business income if they filed as Single or Married Filing Jointly ($125,000 for Married Filing Separately). Additional business income is taxed at a flat 3% tax rate.
To qualify for the BID, you must file a state return and report business income. The state of Ohio defines business income as income generated from the following:
- Transactions, activities, and sources in the regular course of a trade or business operation
- From real, tangible, and intangible property if the acquisition, rental, management, and disposition of the property constitute integral parts of the regular course of a trade or business operation
- From a partial or complete liquidation of a business, including gain or loss from the sale or other disposition of goodwill;
- Income from certain sales of equity or ownership interests in a business OR
- Compensation and guaranteed payments paid by a pass-through entity or a Professional Employer Organization (PEO) on its behalf to an investor who directly or indirectly owns 20% or more of the entity
For more information, visit the Ohio Department of Taxation’s frequently asked questions.
Is my military spouse’s income taxable in Ohio?
Ohio has a tax provision that benefits military spouses by exempting their income from state taxation. Meaning, spouses of service members stationed in Ohio won’t have to pay state income taxes on their earnings. To qualify for this exemption, the spouse must be working in Ohio due to the service member’s military orders.
As the spouse, you can file form IT MIL-SP with your employer to keep them from withholding taxes from your paycheck. If you mistakenly paid taxes to Ohio and need to claim a refund, follow the steps here.
Although your income is not taxable to Ohio, it may be considered taxable to your state of record or the service member’s resident state.
Learn more: 6 Facts for Military Spouse Taxes
Ready to file your Ohio state return? Get started with TaxSlayer!
