Here’s What You Need To Know about Ohio’s New Flat 2.75% Income Tax

Ohio moved to a flat state income tax rate in 2026, down from a graduated system that topped out at 3.125%.

Where It Matters

Ohio has been trimming its top income tax rate for close to two decades, and the flat tax is the next step in that same direction, driven partly by competition with neighboring states like Indiana, which already runs a flat rate, and partly by a broader push in Columbus and Statehouse politics to make the tax code simpler to file and cheaper to administer. So this is a continuation of a trend that's been running for years.

Notice what moved. Income between $26,050 and $100,000 was taxed at 2.75% in 2024, stayed at 2.75% in 2025, and stays at 2.75% in 2026. For someone whose taxable income tops out in that range, this doesn’t mean much. The real dollar impact lands on income above $100,000, which fell from 3.5% in 2024 to 3.125% in 2025 and now to 2.75% in 2026, a meaningful two-year reduction on that top slice of income.

[Tool Coming Soon]

Where This Might Show Up

Roth conversions

You may or may not have heard of Roth conversions. (Watch) When to do a Roth conversion

A Roth conversion means paying ordinary income tax now on money you move from a traditional IRA or 401(k) into a Roth account, in exchange for tax-free growth and withdrawals later. To keep things simple… the analysis is heavily focused on your current tax rate versus your expected future rate.

Not to get technical but… we are financial planners after all. A lower state rate makes conversions somewhat more attractive at the margin, particularly for higher earners whose converted income would land above $100,000 and previously faced 3.125% or 3.5%, and for Ohio residents who plan to retire in Ohio and expect similar or higher state rates elsewhere later. For a conversion that stays under $100,000 of taxable income, the state rate hasn't actually changed at all, since that range was already taxed at 2.75%. The federal side of the math still usually matters more than the state side either way.

Pre-tax retirement contributions

Every dollar you put into a traditional 401(k) or traditional IRA reduces your taxable income at both the federal and Ohio state level in the year you contribute. For a high earner whose top dollars were taxed at 3.125% in 2025, the immediate state tax benefit of that deduction is now slightly smaller at 2.75% in 2026. It doesn't change the case for contributing. It changes the size of the number by a fraction of a percent, which matters more the larger your paycheck. For anyone whose income tops out below $100,000, this deduction is worth the same as it was last year, since the rate on that income hasn't moved.

Bonus and equity compensation withholding

Ohio withholding tables get updated when the underlying tax law changes. If you receive a year-end bonus, vested restricted stock, or a large one-time payment, the state withholding on that payment should reflect the new flat rate rather than the old graduated brackets. Withholding and actual tax owed are two different numbers, and it's worth checking your Ohio withholding specifically in the year a change like this takes effect, rather than assuming the payroll system caught everything automatically.

What this doesn't change

Ohio's flat income tax is a state-level change. It has nothing to do with:

Columbus city income tax...

The City of Columbus charges its own 2.5% municipal income tax, administered through the city's own Income Tax Division rather than the state. Nothing about the 2026 state tax law touches this rate.

Federal income tax...

Ohio's rate is layered on top of federal tax, which follows entirely separate brackets and rules and didn't change because of this legislation.

Local school district income tax...

Some Ohio school districts levy their own separate income tax, distinct from both the state rate and any municipal tax. That's determined at the district level and isn't part of HB 96.

Property taxes...

A frequent source of confusion, since property tax bills in Franklin County and its surrounding counties are a completely separate system administered at the county level, unrelated to income tax brackets of any kind.

So a Columbus resident's full income tax picture in 2026 still stacks federal tax, the 2.75% flat Ohio rate above $26,050, and whatever municipal rate applies where they live and work, which for Columbus proper is 2.5%.

Who Benefits the Most

Higher earners see the real dollar benefit, since income above $100,000 dropped from 3.125% in 2025 to 2.75% in 2026, continuing a fall from 3.5% just two years earlier. Anyone whose taxable income stays under $100,000 was already taxed at 2.75% on the portion above $26,050 and sees no rate change at all in 2026, just one less bracket to think about. Retirees living primarily on Social Security, which Ohio doesn't tax at the state level regardless of this change, and modest pension or withdrawal income may see no practical difference either.

This matters for planning because it means the flat tax changes the relative attractiveness of income-timing strategies more for high earners and business owners than for someone living on a fixed retirement income.

Common Questions

What is Ohio's flat income tax rate in 2026?

2.75% on income above $26,050. Income at or below that amount is not subject to Ohio state income tax.

Did Ohio's flat tax lower taxes for everyone?

No, not evenly. It lowered the rate on income above $100,000 from 3.125% in 2025 to 2.75% in 2026, continuing a reduction from 3.5% in 2024. Income between $26,050 and $100,000 was already taxed at 2.75% before this change and stays at 2.75%, so most middle-income earners see no rate change at all, just a simpler, single-bracket system.

Does the Ohio flat tax affect Columbus city income tax?

No. Ohio's state flat tax and Columbus's municipal income tax are entirely separate systems. Columbus charges its own 2.5% city income tax regardless of the state rate.

Should I do a Roth conversion because of the new Ohio tax rate?

The state rate is one input among several, including your federal bracket this year versus your expected future bracket, and how a conversion affects things like Medicare premium surcharges or other income-based thresholds. A lower, flatter state rate makes conversions marginally more attractive but rarely decides the question on its own.

Where can I read the actual law?

House Bill 96 is available through the Ohio General Assembly's website, and the Ohio Department of Taxation publishes updated bracket and withholding guidance each year at tax.ohio.gov.

Written byNick GeorgeCFP®, ChFC®, CLU®, IWA™FounderView bio →

Back to Clarity Corner