The purpose of this article is to provide information regarding the types of Ohio Local payroll taxes and the calculation method for the liability.  This article is not intended as a comprehensive guide to all OH Local payroll tax situations but instead to assist you in understanding the general tax calculation parameters.

Local Income Tax

OH Local taxes can be challenging to decipher as there are many variables that can contribute to the total tax rate an EE is liable for.  There can be taxes that are due to the municipality where the work is performed, taxes due where the EE lives, taxes due based on a Joint Economic Development District or Zone, credit for where the EE resides, etc.  

School District Tax

OH also levies a mandatory School District Tax for all residents within participating School District boundaries.  Note: It is important to confirm your OH EE's have a school district selected on their Tax Information Screen, if applicable.  If a School District Tax is applicable but is not selected it will not withhold the tax from the EE and the ER becomes responsible for remitting the tax.  See the School District Assignment article for more information.

Due to the complexity of jurisdictional interactions, the state and some municipalities have provided tools to help determine the appropriate taxation.

Ohio Finder

This site will allow you to enter a physical address and will return the appropriate Municipal Income and School District tax for that location.  This is the municipalities general tax rate and is the rate due for work performed in the municipality.  This is also the general tax rate for residents of the municipality but may be affected by the resident’s work location if they work in another jurisdiction.

Ohio Finder JEDD/JEDZ

This site will allow you to enter a physical address and will indicate if the address is subject to JEDD or JEDZ taxation and will provide the taxation rate, if applicable.

City of Columbus Tax Municipalities Database

This site compiles information from Ohio municipalities on their income tax in one place.  The information provided on this site includes the municipalities base tax rate; their tax credit and credit limit, if applicable; and contact information for each agency within the database.  Once the site opens select Tax Municipalities from the Income Tax Home menu. 

How OH Local Taxes are Calculated

Income taxes are paid first to the municipality where an individual works and then where they live. Although there is no reciprocity between municipalities, many provide credits to residents based on taxes paid to the municipality where they work.  isolved is programmed with these credits and calculates this automatically.

In addition to municipalities OH has Joint Economic Development Districts (JEDD) and Joint Economic Development Zones (JEDZ).  A JEDD creates a partnership between a municipality and a township, and a JEDZ between a local government and a township.  Each JEDD/JEDZ comes with an income tax that is split between the township and municipality/local government, based on what services they each provide. Each JEDD/JEDZ is unique in how it is structured, as different services are offered by each participating entity and an area may have multiple JEDD or JEDZ areas denoted by I, II, III, etc.  Taxation for locations within JEDD and JEDZ areas work similarly to standard municipal taxes as businesses and employees working within the JEDD, and individuals living within the JEDD, may be liable for taxes.

Examples

Let’s assume Robin lives in Dublin OH, works in Columbus OH and has taxable wages of $1,000.00

Work Location: Columbus has a tax rate of 2.5%

Resident Location: Dublin has a tax rate of 2%, with a 100% credit up to 2% for the work location

isolved will first calculate the work location tax: $1,000.00 x 0.025 = $25.00

isolved will then calculate the resident location tax: $1,000.00 x (0.020-0.025) = $0.00

Robin is liable for the work location tax of 2.5% but is not liable for any resident tax as 100% of the 2% Dublin tax is credited based on their work location tax.

Now let’s assume Robin moves and changes jobs; they now live in Columbus and work in Dublin:

Work Location: Dublin has a tax rate of 2%

Resident Location: Columbus has a tax rate of 2.5%, with a 100% Credit up to 2.5% for the work location

isolved will first calculate the work location tax: $1,000.00 x 0.020 = $20.00

isolved will then calculate the resident location tax: $1,000.00 x (0.025-0.020) = $5.00

Robin is liable for the work location tax of 2% and is also liable for 0.5% of the resident tax: resident tax rate of 2.5% less the work location tax rate of 2% (100% credit).

Robin has changed jobs again and now works in a location subject to JEDZ taxation and lives in Columbus:

Work Location:  The work location address has a tax rate of 0% for municipal taxes, but is subject to a 1% JEDZ tax

Resident Location: Columbus OH has a tax rate of 2.5%, with a 100% Credit up to 2.5%

isolved will first calculate the work location tax: $1,000.00 x 0.010 = $10.00

isolved will then calculate the resident location tax: $1,000.00 x (0.025-0.010) = $15.00

Robin is liable for the work location tax of 1% and is also is liable for 1.5% of the resident tax: resident tax rate of 2.5% less the work location tax rate of 1% (100% credit).