Major Tax Change: Ohio's New Flat Tax (2026)
On January 1, 2026, Ohio's income tax officially became a flat 2.75% tax, marking the most significant Ohio tax change in over 20 years. This was enacted via House Bill 96, signed by Governor Mike DeWine on June 30, 2025.
The new structure is simple:
- Income $0 - $26,050: 0% (no state tax)
- Income above $26,050: Flat 2.75%
This makes Ohio the second-lowest flat-tax state in the nation, behind only Arizona (2.5%) and ahead of Indiana (2.95%) and Pennsylvania (3.07%). The change replaced the prior two-bracket system that had a 3.5% top rate on income over $100,000.
The Catch: Ohio Municipal Income Taxes (RITA/CCA)
Unlike most states, Ohio allows municipalities to impose their own income taxes on top of the state's 2.75%. There are 600+ Ohio cities and villages with local income tax rates ranging from 1.0% to 3.0%.
| Ohio City | Local Tax Rate | Population |
|---|---|---|
| Columbus | 2.50% | 906,000 |
| Cleveland | 2.50% | 362,000 |
| Cincinnati | 2.10% | 309,000 |
| Toledo | 2.25% | 270,000 |
| Akron | 2.50% | 189,000 |
| Dayton | 2.40% | 137,000 |
| Parma | 2.25% | 81,000 |
| Canton | 2.50% | 70,000 |
| Lorain | 2.00% | 65,000 |
| Lakewood | 2.00% | 50,000 |
Work City vs Home City: How Ohio's Municipal Tax Works
Ohio uses a complex work-city/home-city system:
- Your work city typically withholds and gets first claim on your municipal income tax
- Your home city may impose its own tax, but typically grants a credit for taxes paid to the work city
- If your home city's rate is higher than your work city's, you may owe additional tax to your home city
- If your home city has no income tax, you owe nothing additional (just the work city tax)
- Cities are administered by either RITA (Regional Income Tax Agency, 350+ municipalities) or CCA (Central Collection Agency, primarily Cleveland-area cities), or self-administered (Columbus, Cincinnati, etc.)
Who Benefits Most from Ohio's Flat Tax?
The shift to a flat 2.75% rate disproportionately benefits high earners. Analysis from Policy Matters Ohio and ITEP:
- Top 1% (income over $754,000): Saves average of $67,983-$69,000/year
- Top 5% (income $250,000-$754,000): Saves $1,500-$5,000/year
- Middle income ($72,000): Saves approximately $459/year
- Income under $26,050: Saves $0 (was already at 0%)
The flat tax also tightened exemption rules. Starting in 2026, individuals with MAGI over $500,000 lose access to:
- Personal, spousal, and dependent exemptions (previously $2,400 each)
- Joint filing credit
2026 Federal Tax Brackets
| Taxable Income (Single) | Tax Rate |
|---|---|
| $0 – $11,925 | 10% |
| $11,926 – $48,475 | 12% |
| $48,476 – $103,350 | 22% |
| $103,351 – $197,300 | 24% |
| $197,301 – $250,525 | 32% |
| $250,526 – $626,350 | 35% |
| $626,351+ | 37% |
Ohio vs Other States: 2026 Comparison
| State | $100K Net Take-Home (Single, no local tax) |
|---|---|
| Texas / Florida (no state tax) | ~$78,500 |
| Ohio (2.75% flat, outside city limits) | ~$76,400 |
| Pennsylvania (3.07% flat) | ~$75,500 |
| North Carolina (3.99% flat) | ~$74,500 |
| Illinois (4.95% flat) | ~$73,400 |
| Ohio + Columbus/Cleveland (2.5% local) | ~$73,400 |
| California (single) | ~$72,000 |
| NYC Resident | ~$69,500 |
Key insight: Ohio's state-only burden is competitive, but adding 2.5% local tax in major cities brings the effective rate to about 5.25% — similar to Illinois's flat 4.95%. The "Ohio advantage" only works if you live AND work outside of incorporated city limits.
Ohio Retirement Tax Benefits
Ohio offers limited but real retirement tax benefits:
- Social Security: Fully exempt from state income tax
- Retirement Income Credit: Up to $200 credit if age 65+ and eligible
- Senior Citizen Credit: $50 credit if age 65+
- 401(k)/IRA/Pensions: Taxed at the flat 2.75% rate
- Local treatment varies: Most cities exempt retirement income from local tax
This makes Ohio less retirement-friendly than Pennsylvania or Illinois (which fully exempt retirement income) but better than Connecticut or Minnesota (which tax most retirement income).
Frequently Asked Questions
For 2026, Ohio has a flat 2.75% state income tax on all nonbusiness income above $26,050. Income at or below $26,050 is taxed at 0%. This was enacted under House Bill 96 (signed June 2025), which collapsed Ohio's previous two-bracket system into a single flat rate. Ohio's 2.75% rate is the second-lowest flat tax in the nation, behind only Arizona's 2.5%.
Ohio is unusual in that most cities and many villages impose local income taxes ranging from 1.0% to 3.0%, on top of the state's 2.75% flat tax. Cleveland is 2.5%, Cincinnati 2.1%, Columbus 2.5%, Toledo 2.25%, Akron 2.5%. These are collected by regional tax agencies (RITA - Regional Income Tax Agency, or CCA - Central Collection Agency), not the state. Most cities use a work-city-tax with credit for home-city tax rule.
Ohio is moderately retirement-friendly: Social Security benefits are fully exempt from state income tax, and Ohio offers a Retirement Income Credit of up to $200 for those 65+. However, 401(k) withdrawals, IRA distributions, and most pension income are taxed at the flat 2.75% rate. Many local municipalities exempt retirement income from local income tax, but rules vary by city.
Ohio has a unique tax structure where the first $26,050 of nonbusiness income is taxed at 0% — essentially a zero bracket that functions like a large standard deduction. Income above $26,050 is taxed at the flat 2.75%. This threshold is not indexed for inflation in 2025-2026. Combined with Ohio's $2,400 personal exemption credit (which phases out at $500,000 MAGI), many Ohioans earning under $35,000 effectively owe zero state income tax.
Sources & Methodology
- Ohio Revised Code § 5747.02 — Income tax statute (as amended by HB 96)
- House Bill 96 (136th General Assembly, 2025) — Flat tax enactment
- Ohio Department of Taxation — Annual rate tables and withholding guidance
- Tax Foundation — 2026 state tax data
- Policy Matters Ohio / ITEP — Distributional analysis
- Regional Income Tax Agency (RITA) — Municipal tax administration
- Central Collection Agency (CCA) — Cleveland-area municipal taxes
Calculator methodology reviewed by Benjamin Thomas, CPA, MST. Rates verified against Ohio Department of Taxation publications and RITA/CCA directories, January 2026.