Ohio Income Tax Changes: What You Need to Know

Sue Schloemer

Jul 03, 2025

On June 30, 2025, Ohio Governor Mike DeWine signed into law the state’s biennial operating budget, which includes modifications to the individual income tax structure. The enacted provisions implement a phased transition to a flat tax and introduce new income-based limits on certain tax credits and exemptions. These changes will take effect over the 2025 and 2026 tax years.

 

Flat Tax Rate Implementation

The most notable change is the transition to a flat income tax rate for nonbusiness income. Under the new law, Ohio’s graduated income tax brackets will be collapsed into a single flat rate of 2.75% for income over $26,050, phased in as follows:

  • Tax Year 2025: The top marginal rate will be reduced to 3.125%
  • Tax Year 2026: The full flat rate of 2.75% will take effect

This reduction is expected to primarily benefit higher-income earners, particularly those with six-figure incomes, and is projected to save taxpayers more than $1 billion over the next two years.

 

Employer Withholding Adjustments

In response to the rate changes, Ohio’s employer withholding tables will be updated. As a result, employees may see a modest increase in take-home pay prior to the filing of their tax returns.

 

Changes to Tax Credits and Exemptions

While the bill reduces overall tax rates, it also tightens eligibility for certain tax credits and exemptions:

  • In 2025, the joint filing credit and personal and dependent exemptions will be available only to taxpayers with modified adjusted gross income (MAGI) of $750,000 or less
  • In 2026, the income cap will be further reduced to $500,000 MAGI
  • Under previous law, these credits and exemptions were available regardless of income level

 

Understanding the Impact and Planning Ahead

These changes represent a continued shift toward a simplified income tax structure in Ohio and may have different implications depending on your income level and filing status. Now is an opportune time to assess how these updates could affect your tax situation. Our team is available to help you:

  • Analyze the impact of the new flat tax rate and credit limitations on your projected tax liability
  • Identify and implement any necessary adjustments to estimated tax payments or withholding

We are here to support you as you plan ahead and adapt to Ohio’s evolving tax structure. For more information, visit the Ohio Department of Taxation website.

 

Contact us to learn more

 

© Copyright 2025. All rights reserved.

 

About The Author

Sue enjoys helping clients succeed. Her breadth and depth of accounting knowledge combined with over 25 years of…

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