Ohio's New Tax Changes | State & Local Taxes | Rea CPA

Navigating Ohio’s New Tax Changes: What You Need to Know for FY 2024-2025

SALT Changes | Rea CPA

There have been several recent changes to Ohio’s operating budget for the biennium ending June 30, 2025. These changes encompass various tax provisions that may significantly impact your financial landscape. As your trusted Rea advisors, we aim to keep you informed and prepared for these modifications. Let’s dive into the most impactful tax changes:

Individual Income Tax: A Simplified Approach 

Ohio is taking strides toward simplifying its individual income tax system. Starting from tax year 2024, the number of tax brackets for nonbusiness income will be streamlined from four to three. This phase-in process is set to continue, reducing the brackets further to just two. This change aims to make the tax filing process smoother and more straightforward for individuals. 

Correction of Defective Resident Credit for Other State Pass-Through Entity Elections

In a significant move to rectify a long-standing issue, Ohio has fixed a problem that previously burdened most resident owners. Previously, participating in other states’ pass-through entity (PTE) elections led to double taxation for Ohio resident owners, leading most to abandon these opportunities. However, the budget bill now allows Ohio residents credit for taxes paid to other states when utilizing pass through entity elections, allowing for new tax-saving planning opportunities. 

Municipal Income Taxes for Employers with Remote Workforce   

As the workforce landscape continues to evolve, Ohio is adapting its tax rules to accommodate remote working arrangements. For tax years ending after December 31, 2023, businesses can now use a modified apportionment formula to calculate net profits, accounting for the activities of remote employees. This means companies can attribute the property and payroll of remote workers to the reporting office, not the employee’s home location. This means that employers can fulfill their employee withholding requirements while avoiding having to pay entity income tax to the municipality, so long they have no sales, property, or payroll in the jurisdiction aside from the remote worker. 

Commercial Activity Taxes (CAT) Exclusion 

Certain businesses will benefit from an increased exclusion threshold under the new bill. For tax years 2024 and 2025, the first $3 million and $6 million, respectively, will be excluded from the CAT calculation. These excluded amounts will not be subject to the 0.26 percent CAT rate. Taxpayers will still need to file $0 returns to claim the exclusion. Additionally, the annual filing method has been eliminated so all taxpayers that are required to file will now have a quarterly filing requirement. 

Sports Gaming Tax: Rate Increase 

For those involved in the sports gaming industry, please be aware that the state sports gaming receipts tax rate has increased from 10 percent to 20 percent since July 1, 2023. Take this adjustment into account when planning and managing your sports gaming activities. 

Ohio’s new budget bill brings both challenges and opportunities for taxpayers. We are here to help you navigate through these changes smoothly. We encourage you to reach out to us with any questions or concerns you may have about how these tax updates may affect your financial strategies. 

At Rea, we pride ourselves on staying ahead of the curve and providing you with the expertise and support you need to thrive in an ever-changing tax landscape. Rest assured that we are committed to helping you make informed decisions that will lead to a brighter financial future. 

By Joseph Popp (Dublin Office)