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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Annual Social Security Income
Annual Retirement Account Income
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Annual Income from Private Pension
Annual Income from Public Pension
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- Our Expert
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.
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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 $100,000 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 - $25,000||0.000%|
|$25,001 - $44,250||2.765%|
|$44,250 - $88,450||3.226%|
|$88,450 - $110,650||3.688%|
How high are property taxes in Ohio?
The average effective property tax rate in Ohio is 1.41%, higher than the national average by a fairly large margin. The median home value in the state is $180,200 and the median real estate tax payment is $261 less than the $2,795 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 $34,600 in 2021. 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.
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 7.24%. 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.