Ohio
Taxes and business formation • USA 2025–2026
LLC in Ohio
Corporation in Ohio
Tax system of Ohio
Income Tax
Ohio has a progressive personal income tax with rates ranging from 2.75% to 3.5% (for 2024–2025). The top rate applies to income above $115,300. In addition, most state residents also pay a local municipal income tax that can reach up to 3% depending on the city (for example, in Cleveland and Columbus). Wages, business income, investments, dividends, and rental income are all subject to taxation. Deductions and credits are available, including a Business Income Deduction for small business that exempts the first $250,000 of small business income from taxation ($125,000 for single filers). This state deduction is applied at the individual tax return level and is suitable for sole proprietors and pass-through entities.
Sales Tax
Ohio's base sales tax rate is 5.75%, but with local surcharges (county surtax) the combined rate can reach up to 8%. Sales tax applies to most goods and a number of services, including rentals, communication services, security, and some repair services. Groceries and prescription medications are exempt. Determining the taxable base and the correct sales tax rate can be quite complex and requires a professional approach and knowledge of state law. Our firm provides services for obtaining a Sales Tax Certificate and for preparing and filing the Sales and Use Tax Return. We advise business owners on all matters related to this tax, including registration, calculation, and reporting.
Property Tax
Ohio levies property tax at the county and school district level. The average effective rate is about 1.56% of market value, which is above the national average. Commercial and residential real estate are taxed differently, and properties are reassessed annually.
Business Taxes
Ohio has a unique tax for legal entities — the Commercial Activity Tax (CAT). This is a tax on gross receipts rather than profit and applies to all businesses with annual revenue above $150,000. The CAT rate is: • $150 — a flat fee on revenue between $150,000 and $1,000,000, • 0.26% on gross receipts above $1,000,000. The CAT replaces the traditional corporate income tax and applies to all business structures: C-corporations, S-corporations, LLCs, and sole proprietors. Ohio does not require commercial LLCs and corporations to file an Annual Report.
Excise Taxes
Ohio levies excise taxes on alcohol, tobacco, gasoline, car rentals, and marijuana (under a licensed program).
Favorable Tax Conditions
Despite the presence of personal and municipal income taxes, Ohio offers favorable conditions for small and medium-sized businesses: no traditional corporate tax — replaced with the CAT at a predictable rate — and the Business Income Deduction, which provides significant tax relief for sole proprietors and owners of LLCs and S-corporations.
Compared to Other States
Personal income tax in Ohio is lower than in most states with a progressive scale, especially when the business deduction is factored in. The CAT is a unique gross receipts tax that is favorable for high-margin companies but can be burdensome for businesses with high turnover and low profit. Property tax is above average, especially in urban counties, but the tax structure remains transparent. Ohio also has no estate or gift tax, which is favorable compared with neighboring states (for example, Pennsylvania). Sales tax is moderate, but the tax base is fairly broad.
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