Honestly, if you've lived in the Buckeye State for more than a few years, you’re probably used to the "tiered" system. You know the drill: the more you make, the bigger the chunk the state takes. But Ohio's tax landscape is currently undergoing its most radical transformation in decades. We are talking about a total overhaul. Basically, the state is ditching the old ways and racing toward a flat tax.
If you are asking what is state tax in ohio right now, the answer depends entirely on which calendar year you're looking at. For 2026, the game has officially changed.
The Big Shift to a 2.75% Flat Tax
Ohio has spent years slowly trimming its income tax brackets. It’s been a slow burn. But as of January 1, 2026, the state has officially collapsed its remaining brackets into a single, flat rate for the vast majority of residents.
Here is the breakdown. If your taxable income is $26,050 or less, you owe nothing. Zero. You're in the clear. But for every dollar you earn above that $26,050 threshold, you are now taxed at a flat 2.75%.
Think about how weird that is compared to five years ago when we had five or six different brackets topped out near 4.8%. Now, whether you’re making $50,000 or $500,000, that 2.75% is the magic number. It makes Ohio one of the most "flat" states in the country, trailing only a handful of places like Arizona.
The Catch for High Earners
You might think the wealthy are just winning across the board here. Sorta. While the rate is lower, the 2026 budget (House Bill 96) tucked in some fine print. If your modified adjusted gross income hits $500,000, you lose your personal, spousal, and dependent exemptions. You also can't claim the joint filer credit anymore.
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It’s a bit of a "give and take." The state gives you a lower flat rate but takes away the "per-person" discounts that usually help lower your bill.
What Most People Get Wrong About Business Income
Business owners in Ohio have a completely different set of rules. It's confusing. Many people assume their business profit is just "income" and falls under that 2.75% rate.
Nope.
Ohio still keeps the Business Income Deduction (BID) alive and well. Here’s how it works in 2026:
- The first $250,000 of business income is 100% tax-free.
- Anything over $250,000 is taxed at a flat 3%.
Wait, notice that? The business rate (3%) is actually higher than the individual rate (2.75%) now. For years, people fought to characterize their money as "business income" to save. Now, some tax pros are actually looking at ways to turn business income back into "nonbusiness income" to snag that lower 2.75% rate.
It’s a total flip-flop.
The "Invisible" Tax: Municipalities
You can't talk about what is state tax in ohio without mentioning the local "muni" tax. This is where Ohio gets really unique—and really annoying.
Most states collect local taxes at the state level. Ohio? We let over 600 different cities and villages do their own thing. If you live in Columbus, you might pay 2.5%. If you’re in a smaller township, you might pay 0%.
The 2026 rules have tried to simplify this slightly. For instance, the "occasional entry" rule now protects you if you only work in a city for 20 days or less—up from the old 12-day limit. This is huge for contractors and traveling nurses who used to get dinged for working a week in three different cities.
Sales Tax: The New Trade-Off
Since the state is losing roughly $1.1 billion in revenue because of the lower income tax, they had to find the money somewhere else. They found it in the sales tax.
While the base state sales tax remains 5.75%, the 2026 budget killed a bunch of old exemptions. Basically, things that used to be tax-free aren't anymore.
- Digital Goods: More "e-services" and digital downloads are getting hit.
- Data Centers: A big exemption for equipment used in data centers was scaled back.
- Vending Machines: Even refrigerated food vending machines lost their "free pass."
When you add the county and transit authority piggyback taxes, most Ohioans are actually paying between 6.5% and 8% at the register.
Hidden Credits You Might Be Missing
Even with a flat tax, you shouldn't just hand over the full 2.75% without checking for credits. Ohio has some specific ones that are actually quite generous if you know where to look.
The SGO Credit: If you donate to a certified Scholarship Granting Organization, you get a dollar-for-dollar tax credit. You can get up to $750 back (or $1,500 if filing jointly). It’s basically a way to tell the state, "I’m spending my tax money on this school instead of giving it to you."
Home Schooling: You can still claim up to $250 for educational expenses if you're homeschooling your kids. Just keep those receipts; the Department of Taxation is getting stricter about "audit-proofing" these claims.
Retirement Income: If your income is under $100,000, you can still pull credits for retirement distributions or if you're over 65. It's not a lot, but every bit helps when the cost of eggs is still high.
Why This Matters for Your Paycheck
If you’re an employee, your HR department should have updated your withholdings by now. But because the rate is so low, many people are finding they owe a little bit at the end of the year because their "other" income—like interest from a savings account—is now taxed at that same 2.75% without any withholding.
Estimated payments have also seen a shift. Starting in 2026, the second and third quarter payment deadlines have moved up.
- Q1: April 15
- Q2: June 15 (Used to be July)
- Q3: September 15 (Used to be October)
Missing these dates is a quick way to get hit with an underpayment penalty. The state is being much more aggressive about collecting on time now that the rates are lower.
Actionable Steps for 2026
Stop thinking about tax brackets. They're gone.
First, look at your "Modified Adjusted Gross Income." If you're hovering around that $500,000 mark, talk to a CPA immediately. Falling $1 over that line could cost you thousands in lost exemptions. It might be worth contributing more to a 401(k) or a traditional IRA just to drop your income back below the threshold.
Second, check your city tax. If you work from home three days a week but your office is in a high-tax city like Cleveland or Cincinnati, make sure you aren't overpaying. You are only supposed to pay the city tax for the days you are physically in the city.
Finally, keep an eye on the "Business Income" vs "Nonbusiness Income" distinction. With the individual rate now lower than the business rate (for amounts over $250k), the old strategy of "S-Corp everything" might actually be hurting your bottom line.
Ohio's tax system is simpler now, sure. But "simpler" doesn't always mean "cheaper" unless you're playing the rules correctly. The move to a flat 2.75% is a massive experiment in state economics, and as a resident, you're the one holding the bill. Make sure it's as small as possible.