Budget Contains Significant Personal Income Tax Relief

Republican House and Senate leaders reached a compromise in the new budget to provide a 3% across-the-board personal income tax cut. This relief will benefit small- and mid-sized employers that pay taxes on business income through an owner’s individual income taxes. Details include:

• The top income tax bracket (4.797%) for high earners has been eliminated, reducing the number of brackets to four — compared to nine brackets six years ago.
• Rates will be lowered for all income brackets.
• The rate of the new top bracket — applicable to those earning more than $110,650 in 2021 — will fall from 4.413% to 3.99%.
• Ohioans earning less than $25,000 will pay no state income tax.

The new budget is expected to result in nearly $1.7 billion in personal income tax relief over the biennium, while making Ohio more competitive. Senate Finance Committee Chair Matt Dolan (R-Chagrin Falls) noted that “only Indiana now is lower than us among surrounding states.” Senate President Matt Huffman (R-Lima) said he thinks the budget will deliver the largest personal income tax reduction in state history. 6/30/2021