Ohio’s New Flat Income Tax: What It Means for Your Wallet

Ohio’s New Flat Income Tax: What It Means for Your Wallet

In June 2025, Governor Mike DeWine signed a new two-year budget that includes a major change to Ohio’s tax code: the move to a flat income tax.

This shift simplifies how income is taxed in the state and could impact your take-home pay, retirement planning, and overall financial strategy beginning in 2025.

How the New Flat Tax Works

The new Ohio flat income tax rolls out in two stages:

• Tax Year 2025:

• Income under $26,050: No tax
• Income from $26,050 to $100,000: taxed at 2.75%
• Income over $100,000: taxed at 3.125% (down from 3.5%)

• Tax Year 2026 and Beyond:

• A single flat rate of 2.75% applies to all income over $26,050 regardless of income level

This change replaces Ohio’s multi-tier tax system with one predictable rate, making it easier to plan and model future tax liabilities.

Why This Matters for Ohioans

Many residents can expect to pay less in taxes, especially high-income earners who previously faced higher marginal rates.

• A couple earning $150,000 may save several hundred dollars annually
• Those nearing retirement may find more flexibility in when to recognize income
• It eliminates “bracket creep” where your income increase pushes you into a higher tax rate

But it’s not just about what you save, it’s also about how you plan.

Smart Planning Opportunities

If you live or earn in Ohio, here’s how to prepare:

• Adjust Your Withholding
  Check if your paycheck is still using old rates, update your W-4 to avoid overpaying.
• Rethink Retirement Withdrawals
  IRA or 401(k) distributions may be taxed less if timed strategically in 2026 and beyond.
• Review Salary vs. Distributions
  Business owners should evaluate compensation structure under the new flat model.
• Revisit Charitable Giving
  Fewer brackets may impact after-tax donation value, it’s worth a quick review.

Ohio in a Regional Context

States like Pennsylvania (3.07%) already use flat tax systems. Ohio’s move could boost competitiveness, making it more attractive for talent and businesses, a win for both the economy and residents.

How Strategic Wealth Partners Can Help

At Strategic Wealth Partners, we help clients optimize for changing tax laws. Whether you’re managing retirement income, making business decisions, or looking to reduce your tax burden, we’ll help you build a customized plan.

Want to understand what the Ohio flat income tax means for your bottom line?
📞 Book a call with our advisory team to review your 2025–2026 tax strategy.