How does Ohio state income tax and unemployment insurance work in 2026?
Ohio finishes flattening its income tax to a single 2.75% rate in 2026, and runs unemployment insurance on a $9,500 wage base at a 2.85% new-employer rate.
· Ohio, United States guide
Illustration · Columbus, Ohio
Ohio is a state in motion. It used to run five income tax brackets topping out above 3.5 percent; for 2026 it lands on a single flat 2.75% on income above the zero-bracket, with no tax at all on the first $26,050 of taxable income. You still withhold it on the Ohio IT 4, the way you run federal withholding.
Then two things catch out-of-state employers. Most Ohio cities add their own income tax on top, with Columbus at 2.50%. And unemployment insurance runs on a $9,500 wage base at a new-employer rate of 2.85%, capped at about $270.75 per employee a year.
Does Ohio have a state income tax in 2026?
Yes, but it is flattening fast. For 2026 Ohio collapses its remaining brackets into one flat 2.75% rate on nonbusiness income above the zero-bracket, and employers must withhold it. There is no tax on the first $26,050 of taxable income.
This is the end of a two-year glide path under the 2025 budget. Ohio moved from a top rate above 3.50% through a transitional 2025 step down to the single 2.75% rate, making Ohio one of the flat-tax states.
For payroll the flattening is good news: one rate is simpler to withhold than a sliding scale, and stale guides quoting Ohio's old 3.5 percent top bracket now overstate the state burden. You collect an Ohio IT 4 from each employee and withhold on the revised percentage-method tables the state issued in late 2025.
Two details survive the flattening. Supplemental pay, such as bonuses and commissions, is still withheld at a flat 3.50%, set in law and not pulled down with the headline rate. And the $26,050 zero-bracket is indexed to inflation, so the exact threshold drifts upward each year. Confirm the current figure before you rely on it; the rate above it is the stable part.
Do Ohio cities charge their own income tax on top of the state rate?
Yes, and this is the part out-of-state employers miss. Hundreds of Ohio municipalities levy a local income tax on top of the state 2.75%, typically between 1% and 3%. Columbus charges 2.50%.
If your employee lives or works in a taxing city, you withhold the municipal tax as well as the state tax. Most cities collect through RITA or the CCA, though Columbus runs its own collection office.
Hire someone in Columbus and you withhold 2.50% in city tax on top of the state rate, before a cent of state income tax is settled. Most Ohio cities add 1% to 3%, and a worker who lives in one city and commutes to another can owe two of them. You collect through RITA, the CCA, or the city directly.
Source: Regional Income Tax Agency, Ohio municipal tax rates table
The municipal layer is where the real admin lives. A remote hire in Columbus owes the 2.50% resident rate on all their wages, while a commuter who works inside one city but lives in another can owe tax to both, with a partial credit to sort out. The work-location rule is what trips people up: city tax usually follows where the work is physically performed, not just where the employee lives.
You register for municipal withholding separately, file separate city returns, and track which employees trigger which jurisdiction. Get the residency and work-location split wrong and you either over-withhold, which annoys the employee, or under-withhold, which leaves a city liability for you to clean up.
What is Ohio's unemployment insurance wage base and rate for 2026?
Ohio's UI taxable wage base is $9,500 per employee for 2026, raised from $9,000. New employers pay a standard rate of 2.85%, a maximum of about $270.75 per employee a year.
New construction employers start higher at 5.85%. Experienced employers are rated on their own claims, with total rates running from 0.55% to 10.25% for 2026.
You pay UI on the first $9,500 of each employee's wages; everything above that in the calendar year is not taxed. A new employer holds the 2.85% rate until its account has enough history for an experience rating, then moves onto a rate set by its own claims record.
One 2026 change to budget for: every contributory employer now also pays a new Technology and Customer Service Fee of 0.15% on wages up to $9,000 per employee, for 2026 and 2027, to fund a system upgrade. It sits on top of the contribution rate. The federal layer sits on top of that: FUTA is 6.0 percent on the first $7,000 of wages, less the full credit for compliant state payers, leaving an effective 0.6%. Source: Ohio Department of Job and Family Services, contribution rates.
What other payroll rules apply to Ohio employees?
You run the full federal stack: Social Security at 6.2% to $184,500, Medicare at 1.45%, and FUTA at 0.6% on the first $7,000. Ohio's minimum wage rises to $11 an hour in 2026.
Ohio has no state paid-family-leave or disability programme. Federal FMLA gives 12 weeks of unpaid job-protected leave at employers with 50 or more employees, and that is the only job-protected family-leave layer.
Ohio's minimum wage is constitutional, not legislative: a 2006 amendment ties it to inflation, so it steps up automatically every 1 January. The 2026 rate is $11, with a tipped cash wage of $5.50 where tips bring the worker to the full minimum. Small employers, with annual gross receipts at or below $405,000, and 14 and 15 year-olds stay on the federal $7.25 floor.
On paid leave, Ohio leans entirely on federal law. There is no state-mandated paid sick time and no state paid-family-leave fund, so your only job-protected obligation is the federal FMLA: 12 weeks of unpaid leave once you reach 50 employees. Social Security tops out at $184,500 for 2026, so high earners stop accruing that 6.2 percent partway through the year while Medicare keeps applying on every dollar.
How Teamed runs Ohio payroll end to end
Teamed becomes your legal employer of record in Ohio for $599 per employee per month flat. Zero FX mark-up. Statutory employer cost passes through itemised on every invoice.
You hire the person. Teamed registers for state and municipal withholding, runs the flat 2.75% income tax, files unemployment insurance on the $9,500 base, and handles the new Technology and Customer Service Fee. Everything runs on one platform.
Real HR and legal experts handle your Ohio hires and know the city-tax split, the $9,500 UI wage base, and the 3.50% supplemental rate by heart. An actual person, not a chatbot or a pooled queue. You see every cost: state and municipal withholding, UI contributions, the 0.15% technology fee, and federal employer taxes pass through at cost, itemised and auditable on every invoice. No setup fee, no exit fee.
Teamed becomes your legal employer of record in Ohio for $599 per employee per month flat, with zero FX mark-up. We register for state and municipal withholding, run the flat 2.75% income tax, and file the Ohio wage and overtime and termination rules on the same platform.
Contractor onboarding, EOR payroll, and entity graduation all live on one platform: an Ohio contractor who converts to W-2 keeps their record, and that same employee can graduate from EOR to your own US entity without switching systems. Ohio stacks state withholding, municipal tax and a rising UI base, so the cost case for your own entity arrives sooner per head than in a no-income-tax state like Texas. Use the Crossover Calculator to see the month the model flips. EOR is the right model for Ohio, until it isn't.
The mistake we see on Ohio is reading the flat 2.75 percent and stopping there. Columbus and most other cities add their own income tax, the unemployment base just rose, and a new technology fee lands for 2026. The state rate is the easy part now. The municipal and UI lines are where the work actually is.
Ohio just flattened its income tax to one 2.75 percent rate. That is the line every relocation deck will lead with.
Underneath sits a Columbus city tax of 2.5 percent, a higher unemployment base, and a new technology fee to fund.
A flat rate is not a simple payroll. The city and UI lines are the part we run for you.
