Overview of Ohio Retirement Tax Friendliness
Social Security retirement benefits are fully exempt from state income taxes in Ohio. Certain income from pensions or retirement accounts (like a 401(k) or an IRA) is taxed as regular income, but there are credits available. Both property and sales tax rates are higher than national marks.
Annual Social Security Income
Annual Retirement Account Income
Year of Birth
Annual Income from Private Pension
Annual Income from Public Pension
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|Social Security income is taxed.|
|Withdrawals from retirement accounts are taxed.|
|Wages are taxed at normal rates, and your marginal state tax rate is %.|
- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
Ohio Retirement Taxes
Ohio offers retirees a cost of living that is slightly below the national average, as well as a variety of charming small towns to go along with several major cities and attractions including the Rock & Roll Hall of Fame and Hocking Hills State Park. While winters are cold and snowy, summertime in Ohio is typically warm and beautiful.
Ohio’s retirement taxes are somewhat higher than average as compared with other states. Social Security retirement benefits are fully exempt from income taxes. Seniors with retirement income in addition to Social Security benefits will have to pay income taxes on that money, though they may qualify for a tax credit. Sales taxes and property taxes are especially important for retirees, who generally operate on a fixed budget. In Ohio, both taxes are slightly above U.S. marks.
A financial advisor in Ohio can help you plan for retirement and other financial goals. Financial advisors can also help with investing and financial planning - including taxes, homeownership, insurance and estate planning - to make sure you are preparing for the future.
Is Ohio tax-friendly for retirees?
Ohio is moderately tax-friendly for retirees. Just how friendly depends on where you receive the bulk of your income from and how you spend it. Seniors who rely mostly or fully on Social Security retirements benefits should do rather well under Ohio’s retirement tax system, as Social Security is exempt from state income taxes. Retirees who get most of their income from other sources, such as a 401(k) or a pension, will likely face a larger tax bill.
Likewise, retirees who spend more of their money on non-tangible services (movie tickets for example), as well as necessities such as food and medicine, should have a smaller total sales tax bill, as those items are all tax-exempt.
Is Social Security taxable in Ohio?
Ohio does not tax Social Security retirement benefits, including those that are taxed federally. That, along with the state’s low cost of living, can make it possible for some to live off Social Security benefits alone in many Ohio counties.
Are other forms of retirement income taxable in Ohio?
Any income from pension or retirement accounts is taxed as regular income, at the rates shown in the table below. Taxpayers with retirement income from these sources in excess of $8,000 can claim a credit of up to $200. Taxpayers age 65 and older are eligible for an additional $50 credit if their modified adjusted gross income (MAGI) is less than $100,000.
Income Tax Brackets
|Ohio Taxable Income||Rate|
|$0 - $22,150||0%|
|$22,150 - $44,250||2.85%|
|$44,250 - $88,450||3.326%|
|$88,450 - $110,650||3.802%|
|$110,650 - $221,300||4.413%|
How high are property taxes in Ohio?
The average effective property tax rate in Ohio is 1.48%, higher than the national average by a fairly large margin. The median home value in the state is $157,200 and the median real estate tax payment is about $200 less than the $2,578 national median.
What is the Ohio homestead exemption?
The Ohio homestead exemption reduces the property taxes owed by qualifying seniors in Ohio. To be eligible, a homeowner must be at least 65 years old and have an Ohio Adjusted Gross Income (OAGI) of no more than $33,600 in 2020. You can also qualify for the exemption if you are permanently disabled or if you are the surviving spouse of someone who previously received the exemption.
The exemption is equal to $25,000 off the market value of your home. For example, if your home value is $150,000, only $125,000 of that is taxable after the exemption. According to the Ohio Department of Taxation, this equals average savings of about $435 per eligible homeowner.
How high are sales taxes in Ohio?
When considering the state sales tax rate of 5.75% and county rates as high as 2.25%, the average total sales tax rate in Ohio is about 7.17%. That ranks in the top half of the nation.
However, some sales tax exemptions in Ohio should help seniors limit the amount of their budget that goes to sales taxes. Exempt items include most groceries, prescription drugs and newspapers.
What other Ohio taxes should I be concerned about?
Ohio schools, cities and districts collect their own income taxes, with rates as high as 3%. These do not apply to retirement income, but retirees with work income may need to pay these taxes.
Ohio eliminated its estate tax in 2013, so retirees who are planning for the settlement of their estate do not need to worry about that.
Most Tax Friendly Places for Retirees
SmartAsset’s interactive map highlights the places in the country with tax policies that are most favorable to retirees. Zoom between states and the national map to see the most tax-friendly places in each area of the country.
Methodology To find the most tax friendly places for retirees, our study analyzed how the tax policies of each city would impact a theoretical retiree with an annual income of $50,000. Our analysis assumes a retiree receiving $15,000 from Social Security benefits, $10,000 from a private pension, $10,000 in wages and $15,000 from a retirement savings account like a 401(k) or IRA.
To calculate the expected income tax this person would pay in each location, we applied the relevant deductions and exemptions. This included the standard deduction, personal exemption and deductions for each specific type of retirement income. We then calculated how much this person would pay in income tax at federal, state, county and local levels.
We calculated the effective property tax rate by dividing median property tax paid by median home value for each city.
In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a city by the household income after subtracting income tax. This product is then multiplied by 35% to estimate the sales tax paid.
For fuel taxes, we first distributed statewide vehicle miles traveled to the city level using the number of vehicles in each county. We then calculated miles driven per capita in each city. Using the nationwide average fuel economy, we calculated the average gallons of gas used per capita in each city and multiplied that by the fuel tax.
For each city we determined whether or not Social Security income was taxable.
Finally, we created an overall index weighted to best capture the taxes that most affect retirees. The income tax category made up 40% of the index, property taxes accounted for 30%, sales taxes 20% and fuel taxes 10%.
Sources: Internal Revenue Service, Social Security Administration, state websites, local government websites, US Census Bureau 2018 American Community Survey, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration