New Ohio budget sets course for 2.75% flat income tax by 2026

Ohio Gov. Mike DeWine on Monday approved the state's new two-year spending plan, which includes a major shift in how Ohioans pay state income taxes. This change, pushed by Republican lawmakers, aims to make the tax system simpler and reduce the amount of money people owe.

The thrust of the tax plan is a move towards a 2.75% flat income tax rate, which means most people will eventually pay the same percentage of their income in state taxes, regardless of how much they earn. This flat rate is set to be fully in place by the 2026 tax year.

Melissa Zetts, a tax expert and owner of Tax 29 in Cortland, says this shift marks a significant change in how income is taxed in Ohio.

“Flat tax is basically most people who have a taxable income after deductions will have just one percent—whether you make $30,000 or $500,000,” Zetts explained.

Before the flat rate officially starts, the budget also lowers the highest income tax rate immediately. For the 2025 tax year, the top rate, which currently stands at 3.5%, will go down to 3.125%.

A benefit for many Ohio residents is that if their income, after certain deductions and exemptions, is $26,050 or less, they will not pay any state income tax at all.

Zetts noted that while the flat tax simplifies the structure on paper, it may not feel much different to most taxpayers.

For the tax year starting in 2024, if your income, after some adjustments and considering exemptions for yourself, your spouse, and any dependents, is more than $26,050 but not over $100,000, you will pay a fixed amount of $360.69 plus 2.75% of the income above $26,050.

If that adjusted income is more than $100,000, the tax will be $2,394.32 plus 3.5% of the amount over $100,000.

Zetts says higher-income earners will likely feel the biggest impact from the change.

“Anybody who has a tax base of over $100,000—they're going to be taxed at currently a 3.5% tax rate. So this will be different, because anybody in excess of $100,000 will now have a 2.75% tax rate starting in 2026,” she said.

For the tax year beginning in 2025, the part of your income that is $26,050 or less will still not be taxed.

If your adjusted income is more than $26,050 but not over $100,000, the tax will be $342.00 plus 2.75% of the amount over $26,050.

For adjusted income above $100,000, the tax will be $2,394.32 plus a slightly lower rate of 3.125% on the amount over $100,000.

For the tax year beginning in 2026 and all years after that, no state income tax will be charged on an adjusted income of $26,050 or less.

For all adjusted income above $26,050, the tax will be $332.00 plus a flat rate of 2.75% on the amount over $26,050.

Zetts adds that married couples with dual incomes might also see a change in how they file.

“Two earners making over $200,000 cumulatively—that’s where they'll notice a difference,” she said. “You might start to see more people file jointly instead of separately in Ohio.”

For those with what's called "taxable business income," a separate 3% tax will apply to that portion of their earnings. However, if the personal exemptions you can claim are more than your regular income (not including business income), that extra amount can be used to lower your taxable business income before that 3% tax is figured out