Ohio 2026 Tax Changes — What Residents & Business Owners Must Know
Beginning January 1, 2026, significant federal tax changes take effect due to the expiration of major Tax Cuts and Jobs Act (TCJA) provisions and updated rules under the One Big Beautiful Bill Act (OBBBA).
Ohio residents — who pay both state and municipal income taxes based on federal AGI — will feel these changes more than most states.
- W-2 earners in Columbus, Cleveland, Cincinnati, Toledo, Akron, Dayton
- Manufacturing, logistics, and healthcare workers
- Small business owners, LLCs, S-Corps, and freelancers
- Real estate investors and landlords
- STR hosts in urban and vacation regions
- Families with children
- Retirees drawing taxable retirement income
- Dual-income households
Key 2026 Federal Changes Affecting Ohio
Standard Deduction Shrinks
TCJA’s larger standard deduction expires in 2026. OBBBA did not extend this provision.
This increases federal taxable income — and because Ohio uses federal AGI as a base, state and local taxable income also increase.
Projected 2026 deduction:
Federal Income Tax Brackets Increase
- 12% → 15%
- 22% → 28%
- 24% → 31%
- dual-income families
- manufacturing and trades workers
- teachers, nurses, and state employees
- technology and healthcare professionals
- households earning $60K–$250K
Higher federal tax liability flows directly into higher Ohio taxable income.
QBI Deduction Made Permanent Under OBBBA
OBBBA permanently preserved the 20% Qualified Business Income (QBI) deduction.
- LLCs
- S-Corps
- contractors
- freelancers
- consultants
- side-business owners
- rental operations that qualify
Ohio does not apply a matching QBI deduction at the state level. QBI is federal-only.
- income thresholds
- SSTB limitations
- compliance and documentation standards
Business owners should ensure proper planning.
Child Tax Credit Shrinks
- Federal Child Tax Credit decreases from about $2,000
- To roughly $1,000 per child
- Refundability reduces
Ohio families, especially in suburban areas and middle-income brackets, will see reduced refunds.
Marriage Penalty Returns
TCJA’s marriage penalty relief expires in 2026.
- faster progression into higher federal brackets
- reduced eligibility for credits
- higher federal AGI, increasing state tax liability
Dual-income couples earning $75K–$225K are most affected.
Ohio-Specific Tax Considerations for 2026
1. Ohio State and Municipal Taxes Start With Federal AGI
- Ohio state income tax
- City or local income taxes
Cities such as Columbus, Cincinnati, Cleveland, Toledo, and Dayton impose local tax rates up to ~3%.
- reduced deductions
- higher federal brackets
- lower federal credits
…all increase both state and city taxable income.
2. Real Estate Owners & Rental Investors Face Federal Changes
- capital gains
- capital gains
- rental loss rules
- STR participation requirements
- timing of sales or refinances
With home values rising across Ohio, capital gains planning is important.
3.STR Owners Must Prepare for Updated Rules
- Columbus
- Cleveland
- Cincinnati
- Hocking Hills
- Lake Erie Shoreline
- reduced bonus depreciation
- stricter IRS participation tests
- updated safe harbor rules
- enhanced recordkeeping requirements
4. Manufacturing, Trades, and Logistics Workers Are Heavily Affected
- factories
- distribution centers
- construction and trades
- transportation and logistics
These workers often earn variable income, overtime, and bonuses — all more heavily taxed when brackets rise.
5. Retirement Income Planning Is Affected by Federal Changes
- IRA withdrawals
- 401(k) distributions
- pension income
- taxable investment withdrawals
Retirees may face increased combined tax burdens.
Who Is Most Affected in Ohio (2026)
- Dual-income families
- Manufacturing and trades workers
- Business owners and contractors
- Real estate investors and landlords
- STR operators
- Retirees with taxable income
- Families with children
- Middle-income earners
- Residents of cities with local income taxes
What Ohio Residents Should Do Before December 31, 2025
- Review federal, state, and city withholding
- Maximize retirement contributions
- Consider Roth conversions before rates rise
- Review LLC/S-Corp structure for QBI planning
- Prepare STR participation documentation
- Evaluate capital gains exposure
- Time property or equipment purchases
- Build a coordinated federal + Ohio + municipal tax strategy
Ohio 2026 Tax FAQ
Does Ohio conform to the QBI deduction?
No. QBI is federal-only.
Will Ohio taxes increase due to 2026 changes?
Tax rates remain the same, but taxable income rises due to federal adjustments.
Are city taxes affected?
Yes. Local taxes also rise because they use federal AGI.
Are families affected?
Yes. The reduced Child Tax Credit and higher AGI reduce refunds.
Are STR owners impacted?
Yes. STR rules tighten and depreciation declines.
Are retirees affected?
Yes. Federal bracket increases raise the tax cost of retirement withdrawals
Get a 2026 Ohio Tax Strategy
Ohio residents face major changes under the 2026 federal tax rules. Reduced deductions, higher brackets, and shifting business and rental rules increase both federal and Ohio taxable income.
A personalized strategy ensures you’re prepared before the changes take effect.