Ohio Tax Reform 2025–2026: Three Brackets in 2025, Flat 2.75% from 2026

Ohio’s path toward a 2.75% flat state income tax is still in place, and the three-bracket system for 2025 (with a top rate of 3.125%) still applies to most nonbusiness income. But for many immigrants and international workers, the bigger day-to-day change is practical: the Ohio Department of Taxation has issued updated 2025 withholding tables effective October 1, 2025, and lawmakers also added new income caps that can cut off key credits and exemptions for very high earners.

If you’re new to Ohio or you’ve just changed jobs, your first tax year can feel like a lot: you’re learning a new payroll system, maybe moving from another state, and possibly juggling U.S. tax rules while supporting family abroad. This guide walks through the full year as a process—what to do first, what to watch each payday, what to save, and what to expect when you file.

Step 1: Know what Ohio is taxing (and what system you are in)

Ohio separates income into two broad buckets that matter for planning:

• Nonbusiness income, such as wages, salaries, and most common personal income.
• Business income, which Ohio continues to tax at a separate flat 3% rate.

Most newcomers working for an employer in Ohio will mainly deal with nonbusiness income, which is where the rate cuts and bracket changes show up.

For tax year 2025, Ohio uses the three-bracket system for 2025 for nonbusiness income:

Those reduced rates apply to income earned on or after January 1, 2025, and the top rate drop to 3.125% is retroactive to that date.

Step 2: Set expectations for withholding before your next paycheck

For immigrants and other mobile workers, payroll withholding can be the difference between a smooth spring filing season and a surprise bill. Ohio’s own rule change matters here: the Ohio Department of Taxation updated withholding tables for 2025, and employers must apply the new tables for payroll periods ending on or after October 1, 2025.

What to do right away:

1. Look at your paystub date and pay period end date. If your payroll period ends on or after October 1, 2025, your Ohio withholding should reflect the updated tables.
2. Compare a paystub from before and after October 1, 2025. You’re not looking for perfection; you’re checking that something changed if your employer’s system needed an update.
3. Ask payroll which Ohio table they’re using. This is especially important if you work for a smaller employer or you recently transferred into Ohio from another state.

If you want the most reliable place to track updates, start with the Ohio Department of Taxation website, which posts employer guidance, tables, and forms through its official portal: see the department’s official Ohio tax information and forms page.

One detail that often confuses workers paid bonuses: the supplemental wage withholding rate remains 3.5%, because that rate is set by law and wasn’t changed in the budget.

Step 3: Track your “MAGI” early if your household income is very high

Lawmakers kept the rate cuts, but they tightened who can claim certain benefits by adding income caps. These caps matter most to high earners, including some physicians, tech leaders, executives, and founders recruited from abroad.

The benefits affected are:

• the joint filing credit
• personal and dependent exemptions

They are now limited by modified AGI (MAGI)—a measure of income used for phaseouts and eligibility.

The caps work like this:

• Starting in 2025, these benefits are only available if MAGI ≤ $750,000.
• Starting in 2026, the cap drops to MAGI ≤ $500,000.

If your household is anywhere near those levels—especially if you have one-time income like stock compensation—talk to a tax professional early in the year. The rate drop can still help, but losing credits and exemptions can offset part of the cut.

Step 4: Understand the timeline to the 2.75% flat tax, so you don’t plan with the wrong year

Ohio’s shift is a two-step story:

• 2025 is the transition year with the three-bracket system for 2025 and a top rate of 3.125% on nonbusiness income.
• Starting January 1, 2026, Ohio is set to move to a 2.75% flat state income tax on most nonbusiness income above $26,050.

The expected structure in 2026 is:

• 0% on nonbusiness income up to $26,050
• 2.75% on nonbusiness income above $26,050

That means a worker earning $30,000 and a worker earning $300,000 would both pay 2.75% on the amount over $26,050, rather than stepping into a higher 3.125% bracket. This flat-tax plan is part of the biennial operating budget signed by Governor Mike DeWine on June 30, 2025, and the source material states it has not been repealed or delayed as of late 2025.

According to analysis by VisaVerge.com, immigrants often feel state tax changes first through payroll withholding, not through headlines—especially families who budget month to month while also paying immigration legal fees, remittances, or international tuition.

Step 5: If you work in Ohio but live elsewhere, plan for the cross-border filing routine

Nonresidents with Ohio-source wages generally pay Ohio tax under the same nonbusiness income rate rules. Many cross-border workers run into two common stress points:

• “Will I be taxed twice?” Often your resident state gives a credit for taxes paid to Ohio, but the details depend on your home state.
• “Why did my employer withhold Ohio tax?” Because your wages are Ohio-source.

If you are relocating during the year, keep a simple log:

• move-in and move-out dates
• work location changes
• paystubs showing Ohio withholding before and after October 1, 2025

That paperwork saves time later when you prepare your state returns.

Step 6: For employers hiring immigrants, build a two-change calendar (Oct. 2025 and Jan. 2026)

Employers sponsoring international talent often focus on visas and start dates, then get caught by payroll timing. Ohio’s tax calendar now has two major action points close together:

• October 1, 2025: updated 2025 withholding tables must be used for payroll periods ending on or after this date.
• January 1, 2026: the 2.75% flat state income tax structure begins for nonbusiness income above $26,050.

Practical steps for HR and payroll teams:

• Confirm your payroll vendor updated Ohio tables for October 2025.
• Warn employees that withholding may shift again in January 2026.
• If you pay bonuses, remember the 3.5% supplemental withholding rate is unchanged.

For employer registration and filing, the source material notes that registration and filing can be handled through the Ohio Business Gateway portal.

Step 7: Prepare for filing season with a simple document checklist and a fixed deadline

For many immigrants, the first Ohio filing year is also the first year dealing with school district taxes or local paperwork differences. The state forms named in the source are:

• Form IT 1040 (Ohio individual income tax return)
• Form SD 100 (school district income tax, if it applies)

For tax year 2025 income, the standard filing deadline is April 15, 2026, unless extended.

A practical checklist to start building now:

• All W-2s and other income statements
• A folder of paystubs around October 1, 2025 (to show the withholding-table switch)
• Records of estimated tax payments, if you make them
• Notes on major life changes (marriage, children, moves), because the new MAGI caps can affect whether you qualify for the joint filing credit and exemptions at very high income

Important: even if you file an extension, there is no automatic extension for payment, and unpaid tax after the due date can trigger penalties and interest.

Step 8: Make sense of “fairness” debates in a way that helps your household plan

Ohio lawmakers argue that lower rates and a flatter structure help with tax relief and competitiveness, and the source material says the shift is projected to save Ohio taxpayers over $1 billion over two years, with most savings going to higher-income households. Critics argue that a flat tax is less progressive, even with the new MAGI caps that remove some benefits from very high earners.

For immigrants, the most practical planning lens is simpler:

• If your income is modest or mid-range, the 0% bracket up to $26,050 and the reduced rates can help, and you’ll usually stay under the MAGI caps.
• If your income is very high, you may still benefit from the move toward a 2.75% flat state income tax, but you should model the loss of credits and exemptions once MAGI crosses $750,000 in 2025 and $500,000 in 2026.

Either way, keep your eyes on the administrative side. In the real world, the Ohio Department of Taxation tables and employer payroll updates are what decide whether you feel these changes steadily during the year—or all at once, at filing time.

If you’d like, I can:
– help you create a paystub comparison checklist,
– draft an email template to payroll asking which withholding table they’re using, or
– outline questions to take to a tax advisor about MAGI and stock-based compensation.