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Update on Ohio Tax Changes
On Thursday, July 1, 2021, Governor Mike DeWine signed Am. Sub. House Bill 110 (HB 110) into law. The budget:
- Provides 2021 municipal income tax guidance to employers and remote workers
- Exempts employment labor services and employment placement services from sales tax
- Reduces personal income tax rates (Ohio top rate is now 3.99% versus 4.797%)
- Made no significant changes to the business income deduction, which offers many business owners a lower 3% tax rate on qualifying income
Return to Work—Municipal Withholding Extension and Changes
Ohio’s emergency order ended June 18, 2021, and with that, the withholding modification provided in the prior year’s HB 197 expires 30 days after, or July 18, 2021.
Ohio’s emergency order ended June 18, 2021, and with that, the withholding modification provided in the prior year’s HB 197 expires 30 days after, or July 18, 2021.
- HB 110 allows employers to extend the HB 197 withholding procedures through December 31, 2021
- Effective January 1, 2022, employers will be required to revert to the pre-COVID 20-day rule and withhold the municipality where the employee is working
- HB 110 will allow employees to file refund claims with their principal place of work city for days they did not work within the withholding city during 2021 only
Significant Business Sales Tax Exemptions Repealed, Reinstated
Effective October 1, 2021, Ohio will repeal the sales and use tax on employment services and employment placement services.
Individual Income Tax Reductions
Ohio will reduce the number of tax brackets and apply lower tax rates at each bracket for 2021.
Effective October 1, 2021, Ohio will repeal the sales and use tax on employment services and employment placement services.
Individual Income Tax Reductions
Ohio will reduce the number of tax brackets and apply lower tax rates at each bracket for 2021.
- Taxpayers earning less than $25,000 will have the Ohio income tax eliminated
- Taxpayers earning more than $110,650 will have an Ohio top tax rate of 3.99%
Additional Individual Tax Changes Available to Ohio Taxpayers
- Credit up to $250 on purchases of supplies by homeschoolers
- A nonrefundable income tax credit on private school tuition--$500/$1,000 credit for families with Federal Adjusted Gross Income (FAGI) less than $50,000/$100,000
Commercial Activity Tax (CAT) Updates
Ohio enacted SB 18 to exempt the 2020 and 2021 Bureau of Workers’ Compensation dividend refunds employers received from the Commercial Activity Tax (CAT).
Ohio enacted SB 18 to exempt the 2020 and 2021 Bureau of Workers’ Compensation dividend refunds employers received from the Commercial Activity Tax (CAT).
Media Relations|Department of Taxation
