Starting September 1, 2013, the Ohio Sales Tax rate will increase while state withholding taxes will decrease. The changes are part of Ohio’s two-year budget that was approved earlier this summer.
The Ohio Department of Taxation analyzed how both an income tax rate decrease at 8.5 percent and the sales tax increase would affect Ohio residents and families, according to Gary Gudmundson, department spokesman.
Gudmundson said for a family with two adults, a child and an average income of $75,698, the tax cut would save them $105 a year. The 0.25 percent state sales tax increase would cost them an additional $37 a year. An individual with an average income of $38,235 would save $49 from the tax cut and would pay an additional $23 a year due to the increased sales tax, according to the agency’s figures.
The state sales tax rate will increase 0.25% starting Sunday to 5.75%. When you add in Marion County’s portion, it will bring the local sales tax rate to 6.75%.
The local sales tax rates can vary wildly. The Ohio Department of Taxation provides a database of sales and use tax rates called the Finder, which can be queried either by address or by ZIP code. The Finder is available here.
All Ohio employers should begin using new state income tax withholding rates that take effect for payrolls ending on or after September 1, 2013 so their employees can immediately benefit from tax cuts in the recently passed state budget, according to an alert issued by Ohio Tax Commissioner Joe Testa. The alert directed employers to reduced withholding tables and how-to instructions posted on the Ohio Department of Taxation’s website (www.tax.ohio.gov).
“The sooner these lower tax rates are applied, the sooner Ohio workers will see the dollars-and-cents benefit of this tax cut,” Testa said. “Most Ohio workers should receive fatter paychecks when the new withholding rates go into effect, but only if their employers apply the new rates at their first opportunity.”
These income tax cuts are just one part of a comprehensive tax reform package in the state budget signed by Governor John Kasich on June 30, which also cut small business taxes by 50 percent. That budget reduces income tax rates for Ohio workers by 8.5 percent in 2013, then by an additional half-percent in 2014 and an additional one percent in 2015 to yield a 10 percent tax cut by tax year 2015. Overall, the total tax-reform package will cut Ohioans’ taxes by $2.7 billion over the next three years.
The lower withholding rate, the first such revision since 2009, means that Ohio employers should deduct 9 percent less state tax from workers’ paychecks beginning September 1. The new rate, to be in effect through the end of 2014, incorporates the 8.5 percent tax cut for 2013 and the additional 0.5 percent cut in 2014.
Ohio workers will benefit from the income tax cut through the withholding changes and fully capture the benefit for all of 2013 when they file their state tax returns next spring.
You can find more details on the tax changes by clicking here.
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