Ohio Income Tax Guide for Employers (2025)

Ohio’s income tax guidelines require close attention to detail. As an employer, you have to manage state and local income tax withholding, unemployment insurance contributions, and new-hire reporting, all while adjusting to the updated 2025 income tax brackets.

A firm grasp of these rules helps ensure payroll accuracy and keeps your business in good standing with state authorities. Here’s what employers should know.

What makes Ohio state income tax unique?

Ohio administers a progressive personal income tax on non-business income and a flat 3% tax on taxable business income, overseen by the Ohio Department of Taxation.

The state also imposes school-district income taxes, which employers must withhold based on an employee’s residence district, not their workplace.

Ohio has replaced its corporate income tax with the Commercial Activity Tax (CAT), which is a gross-receipts-based business tax. With increasing remote work, employers have to confirm where employees live and perform services to determine their withholding and registration obligations.

How income tax works in Ohio

The Ohio Department of Taxation (ODT) administers a progressive income tax system on individuals’ non-business income. Employers are responsible for withholding Ohio income tax from employees’ wages and remitting it to ODT through the Ohio Business Gateway.

To determine proper withholding, employers in Ohio have to complete the Ohio IT 4 (Employee’s Withholding Exemption Certificate). Employers use the official ODT withholding tables (updated effective October 1, 2025) for each pay period.

See also: How Do State Payroll Taxes Vary in the US? (2025 Guide)

2025 Ohio individual income tax rates

According to the Ohio Department of Taxation, for taxable years beginning in 2025, the following brackets apply to Ohio taxable nonbusiness income:

Residency rules and filing status

Ohio residents are taxed on all taxable income, while nonresidents are taxed only on Ohio-source income. Employers must withhold tax accordingly.

Employers must use the employee’s residence address to determine whether to withhold Ohio income tax and/or school-district income tax. Employees living and working entirely outside Ohio are generally not subject to Ohio withholding.

• Residents: Taxed on all income
• Part-year residents: Taxed on income earned while domiciled in Ohio
• Nonresidents: Taxed only on Ohio-source income

Filing statuses follow federal designations: single, married filing jointly, married filing separately, head of household, or qualifying surviving spouse.

Ohio income tax deductions and credits

Ohio allows standard deductions and several tax credits, such as joint-filing, dependent, and retirement-income credits. Deduction and credit eligibility depend on filing status and income levels. Employers are not responsible for applying these directly, but must withhold accurately using each employee’s IT4 form.

Filing and payment details

For individuals

• Form: Ohio IT 1040 and, if applicable, School District SD 100

• Deadline: April 15, 2026 (for 2025 returns) unless extended

• How to file: Online via OH|TAX eServices or by mail. Payments can be made electronically or by check/money order

For employers

• Registration: Register for withholding via the Ohio Business Gateway

• Withholding filings: File Form IT 501 for each withholding period and remit payment electronically

• New hire reporting: Employers must report new hires to the Ohio New Hire Reporting Center within 20 days

• School-district withholding: Required if an employee resides in a taxing district

• Recordkeeping: Maintain wage and tax-withholding records for both state and federal compliance

Other Ohio income tax rates

What employers and workers should know about Ohio taxes

Payroll implications

Employers must ensure payroll systems are updated with 2025 tax brackets and new withholding tables effective October 1, 2025. Incorrect withholding may result in penalties or underpayment liabilities.

Multi-state and remote work considerations

Ohio requires withholding based on where employees work and live. Employers must verify if wages are considered “Ohio-source” income. Out-of-state employees who neither live nor work in Ohio are generally exempt.

See also: State Tax Reciprocity: Filing Your Taxes Made Easy

Business obligations

Employers must comply with state income tax, school-district taxes, unemployment insurance, and CAT obligations. Accurate registration and timely electronic filing through the Ohio Business Gateway are required.

Automating compliance with Deel

Managing payroll and taxes in Ohio requires close attention to the state’s evolving income-tax structure and school-district rules. Employers must apply accurate withholding rates, maintain timely filings, and stay compliant with the Ohio Department of Taxation and ODJFS requirements.

Deel Payroll - US streamlines this process by automating rate updates, filings, and compliance checks. For comprehensive coverage, Deel PEO manages all aspects of employment compliance, ensuring businesses can focus on growth instead of tax logistics.

Simplify payroll and compliance in Ohio with Deel Payroll - US or Deel PEO—built to make US payroll tax management fast, compliant, and effortless.

Book a free 30-minute platform demo with an expert to learn more.