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Ohio Retirement Tax Friendliness

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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.

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You will pay of Ohio state taxes on your pre-tax income of
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Quick Guide to Retirement Income Taxes
is toward retirees.
Social Security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, and your marginal state tax rate is %.
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    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.

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Ohio Retirement Taxes

Photo credit: ©iStock.com/risamay

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

All Filers
Ohio Taxable IncomeRate
$0 - $22,1500%
$22,150 - $44,2502.85%
$44,250 - $88,4503.326%
$88,450 - $110,6503.802%
$110,650 - $221,3004.413%
$221,300+4.797%

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?

Photo credit: ©iStock.com/StanRohrer

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.