Ohio Tax Rates

This post provides an overview of the primary taxes levied at the state level in Ohio. The state is unique in having no corporate income tax, relying instead on a gross receipts tax, and is in the process of transitioning to a low, flat individual income tax. For individuals or businesses seeking comprehensive support with tax filings, compliance, or strategic planning, indinero offers expert services. We encourage all who utilize this summary to explore the tailored tax support available through indinero.

Individual Income Tax

Ohio is transitioning from a graduated tax system to a flat rate individual income tax with a low top rate compared to other states.

  • State Rates (2025): The system has been greatly simplified, with rates ranging from 0.000% to a top marginal rate of 3.125% (effective for 2025, down from 3.50% in 2024).
    • $0 – $26,050: 0.000%
    • Over $26,050: Rates apply up to the top rate of 3.125%.
  • Future Plan: The state is scheduled to adopt a flat rate of 2.75% starting in 2026.
  • Local Income Taxes: Most Ohio cities and villages impose an additional municipal income tax on residents’ and non-residents’ earned income (wages). These rates range from 0.5% up to 3.0%, significantly increasing the overall tax burden for many residents.
  • Retirement Income: Social Security benefits are not taxable in Ohio. The state also offers a credit against the tax for retirement income received.

Sales and Use Tax

Sales tax is a key revenue source, combining a state base rate with county-level additions.

  • State Rate: The general state sales tax rate is 5.75% on the retail sale of most tangible personal property and selected services.
  • Local Taxes: County governments and Regional Transit Authorities may levy additional local sales taxes, ranging from 0.5% up to 2.25%.
  • Combined Rate: The average combined state and local sales tax rate is about 7.24% statewide, though the rate can reach as high as 8.0% in high-tax counties like Cuyahoga (Cleveland area).
  • Exemptions: Key exemptions include groceries (unprepared food for home consumption) and prescription drugs.
  • Use Tax: A state use tax of 5.75% plus the applicable local rate applies to taxable items purchased outside of Ohio but used, stored, or consumed in the state if Ohio sales tax was not collected.

Property Tax (Ad Valorem Tax)

Property taxes in Ohio are collected exclusively at the local level by school districts, counties, and municipalities, and they are generally above the national average effective rate.

  • Assessment Ratio: Real property is assessed at 35% of its fair market value. This assessed value is then used in the tax calculation.
    $$\text{Assessed Value} = \text{Market Value} \times 0.35$$
  • Tax Calculation: The tax is calculated by applying the local mill rate (set by local budgets) to the assessed value.
  • Homestead Exemption: The state provides a Homestead Exemption, which allows qualifying low-income seniors, disabled residents, and disabled veterans to exempt a portion of their home’s market value (currently about $26,200, adjusted for inflation) from all property taxation.

Corporate Business Tax

Ohio is one of the few states that does not impose a corporate income tax. It instead taxes businesses through a Commercial Activity Tax (CAT), a form of gross receipts tax.

  • Commercial Activity Tax (CAT): This is a tax imposed on the privilege of doing business in Ohio, measured by the business’s taxable gross receipts from sales in the state.
    • Tax Rate: The rate is a flat 0.26% (or 2.6 mills) on taxable gross receipts above the exclusion amount.
    • Exclusion Amount (2025): For 2025, businesses with taxable gross receipts of $6 million or less are not subject to the CAT. This threshold is a significant increase from prior years, reducing the number of businesses required to file.
  • Pass-Through Entities: Income from pass-through entities (sole proprietorships, partnerships, S corporations) is subject to a Business Income Deduction on the individual income tax return, and any remaining business income is taxed at a low, flat rate.

Unique and Miscellaneous Taxes

  • No Estate or Inheritance Tax: Ohio no longer imposes a state-level estate tax or inheritance tax (it was fully eliminated in 2013).
  • Motor Fuel Tax: A per-gallon tax is levied on motor fuels, set at approximately 38.5 cents per gallon for gasoline.
  • Severance Tax: The state imposes a tax on the extraction of natural resources, such as oil and gas.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.