Ohio Capital Gains Tax, Explained
Ohio went flat on January 1, 2026, most gains now cost 2.75% at the state level, and business sellers have a $250K deduction angle worth checking. Here's the new math.
Quick Answer
As of January 1, 2026, Ohio taxes capital gains as ordinary income under a flat tax: the first $26,050 of nonbusiness income is tax-free, and everything above it, gains included, pays a flat 2.75%. There's no holding-period discount, and at 2.75% you won't miss it: the federal side (0/15/20% plus the 3.8% NIIT) is where most of your bill lives. Model the full stack in our capital gains tax calculator, enter 2.75% in the state field.
What Changed on January 1, 2026: Ohio Went Flat
House Bill 96, the 2025 state budget, finished a bracket compression Ohio had been running for years. A five-bracket schedule became two rates, 2025 stepped the top rate down to 3.125%, and on January 1, 2026 the last bracket disappeared: Ohio now taxes nonbusiness income at 0% up to $26,050 and a flat 2.75% above that.
Capital gains ride along, because Ohio has never had a separate capital gains rate. Every gain, stock, crypto, a rental building, a business interest, enters the return as ordinary income and takes the same flat rate as your salary. Sell in 2026 instead of 2025 and the identical gain costs less at the state level.
| Tax year | Structure | Rate on a big gain |
|---|---|---|
| A few years ago | Five graduated brackets | Varied with income |
| 2025 | Step-down year | Top rate 3.125% |
| 2026 onward | Flat: 0% to $26,050, then 2.75% | 2.75% |
The zero bracket is per return, not per gain
The 0% band covers your first $26,050 of total nonbusiness income, not the first $26,050 of the gain. If wages or retirement income already fill it, the entire gain rides at 2.75%. Flip side: a retiree with little other income gets a real slice of the gain state-tax-free.
The Math on a $100,000 Gain
Take a married couple in Columbus: $180,000 of W-2 income, and they sell index funds held four years for a $100,000 long-term gain. Their wages already fill the $26,050 zero bracket, so the Ohio answer is one line of arithmetic: $100,000 × 2.75% = $2,750.
The federal side does the heavy lifting. The gain sits in the 15% long-term band, and total MAGI of $280,000 runs $30,000 past the $250,000 NIIT threshold:
| Layer | Rate | Tax on the $100K gain |
|---|---|---|
| Ohio income tax | Flat 2.75% | $2,750 |
| Federal long-term capital gains | 15% | $15,000 |
| Net investment income tax | 3.8% on $30K over $250K MAGI | $1,140 |
| All-in | ≈ 18.9% | ≈ $18,890 |
Notice where the leverage is: shaving the federal layer (holding past one year, harvesting losses, managing the NIIT threshold) moves thousands; the Ohio layer is already close to the floor. Our capital gains tax calculator runs both layers, and the federal brackets guide shows where the 0/15/20% lines fall this year.
The Full Stack: Federal, Ohio, and Your City
Three governments could theoretically reach a gain in Ohio. Two actually do:
- Federal: 0%, 15%, or 20% on long-term gains depending on income, plus the 3.8% NIIT once MAGI passes $200,000 single / $250,000 joint. Short-term gains take your ordinary federal bracket. On a rental sale, depreciation comes back at up to 25% as recapture.
- Ohio: flat 2.75%, short-term or long-term, it doesn't matter. Ohio's rate doesn't care how long you held.
- Your city: generally nothing. Ohio municipal income taxes typically apply to earned income, wages and self-employment, not to investment income like capital gains. Ordinances vary, so confirm your city's treatment, but for most sellers the municipal line on a stock or property gain is zero.
Real estate sellers have one more federal lever worth knowing: a 1031 exchange can defer the federal gain on investment property entirely, and with Ohio's rate this low, the federal deferral is where nearly all the value sits.
Selling a Business? The $250,000 Deduction Changes the Math
Ohio runs a second track for business income: the first $250,000 is deducted entirely, the business income deduction, or BID, and anything above it is taxed at a flat 3%. HB 96 left this regime untouched.
Why does a capital gains page care? Because Ohio business income and nonbusiness income use different calculations. A business or ownership-interest sale must be classified from the actual facts and documents; the business-income deduction should not be applied merely because the asset sold was connected to a business.
For planning, run one projection as nonbusiness income and another under the business-income regime only if the legal classification is supportable. The difference is a reason to review the deal, not evidence that the more favorable classification applies.
Characterization is decided by facts you set before closing
Whether a sale produces business income or plain investment income turns on the structure of the deal and your history with the company, things that are easy to influence before the purchase agreement is signed and impossible to fix afterward. If a business exit is on your calendar, get the Ohio characterization reviewed while the deal terms are still moving.
Ohio Is Now a Cheap Place to Realize a Big Gain. Act Like It
At a flat 2.75%, Ohio's take on a gain now undercuts most of its neighbors, among income-tax states in the Midwest, it's one of the cheapest places to realize a large gain. That changes what planning is worth doing:
- State-level timing games mostly stop mattering. In a progressive-bracket state, splitting a gain across years can cut the state bill meaningfully. At a flat 2.75%, spreading a gain saves Ohio nothing, every dollar pays the same rate whenever it lands. Run timing decisions on the federal brackets instead.
- Ordinary-income strategies got cheaper. Anything that creates ordinary income, a Roth conversion, accelerating a bonus, harvesting a short-term gain, now costs just 2.75% at the state level. If you've been putting off conversions, our Roth conversion calculator shows what a conversion year costs with Ohio's new rate in the mix.
- Loss harvesting still works. Losses net against gains on the federal return and flow through to Ohio, a dollar of harvested loss saves federal rate plus 2.75%.
- Low rate ≠ no paperwork. A six-figure gain still creates an estimated-payment obligation, see below.
Full walkthrough: estimated tax payments guide.
What changed in Ohio
Rate and rule changes for recent tax years and changes already enacted for future years, each linked to the state source. Sources last checked September 2, 2026.
Tax year 2025
- In effect
Top bracket 3.125%
For 2025, income over $100,000 was taxed at 3.125%, with 2.75% below that and the first $26,050 untaxed.
Effective January 1, 2025. Source: Ohio Revised Code 5747.02, checked September 2, 2026.
Tax year 2026
- In effect
Single 2.75% rate above $26,050
HB 96 (2025) removes the 3.125% bracket for 2026: every dollar of Ohio taxable income over $26,050 is taxed at 2.75% (base amount $332). The personal exemption and joint filing credit now require modified AGI under $500,000.
Effective January 1, 2026. HB 96 (2025). Source: Ohio Revised Code 5747.02, checked September 2, 2026.
Educational, not individualized tax advice. Rates shown are statutory; your result depends on residency, filing status, and the income involved.
Ohio Capital Gains FAQs
How much is capital gains tax in Ohio?
For 2026, a flat 2.75% for most people. Ohio taxes capital gains as ordinary income, there is no separate capital gains rate, and as of January 1, 2026 the state runs a flat tax: 0% on the first $26,050 of nonbusiness income and 2.75% on everything above it. If your wages already fill the zero bracket, your Ohio cost is simply gain × 2.75%. Federal tax (0/15/20% plus the 3.8% NIIT) is the bigger layer by far.
Does Ohio have a lower rate for long-term capital gains?
No. Ohio makes no distinction between short-term and long-term gains. Both land on your return as ordinary income at the flat 2.75%. The holding-period clock only matters federally, where crossing one year drops you from ordinary rates to the 0/15/20% long-term schedule. In other words: hold for the federal discount, not for Ohio.
What changed with Ohio income tax in 2026?
House Bill 96, the 2025 state budget, finished Ohio's multi-year bracket compression. Ohio ran a five-bracket schedule a few years back; 2025 was a step-down year with a 3.125% top rate; and starting January 1, 2026, Ohio is a flat-tax state. 0% up to $26,050 of nonbusiness income, 2.75% above. For anyone selling stock, crypto, or property in 2026, the state cost of the sale just went down.
Do Ohio cities tax capital gains?
Generally no. Ohio municipal income taxes are typically levied on earned income, wages and self-employment earnings, not on investment income like capital gains. Ordinances vary city to city, though, so confirm how your municipality treats investment income before you count on it, especially if the gain is connected to a business you operate.
Can the $250,000 business income deduction apply when I sell my business?
Do not assume it does. Ohio's business-income deduction and 3% business-income rate apply only when the amount is classified as Ohio business income. The classification of gain from an asset sale or ownership-interest sale depends on the transaction, the taxpayer, and Ohio law. Model both classifications before closing.
Do I still owe federal capital gains tax as an Ohio resident?
Yes, and it dwarfs the Ohio bill. Long-term gains face federal rates of 0%, 15%, or 20% depending on income, plus the 3.8% net investment income tax once MAGI passes $200,000 single / $250,000 joint. A married couple with $180,000 of wages and a $100,000 long-term gain pays roughly $16,140 federal and $2,750 to Ohio, about 18.9% all-in.
Capital gains tax by state
Selling something big as an Ohio resident?
Book a free 30-minute call with our team about your sale and how Taxstra can help. Modeling the federal and Ohio tax on the sale and building the estimated-payment plan happen in a paid engagement. Nationwide remote firm.
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